Controversial proposals by the Treasury to clear a backlog of 65,000 tax avoidance cases dating back to 2004 by seeking upfront payments have been slammed by tax advisors, who say the measures would be retrospective and “completely contrary to natural justice”.
The Chartered Institute of Taxation (CIOT) has said that the measures would hand “almost unprecedented executive powers” to HM Revenue & Customs (HMRC) and that extending the department’s powers in such a way without safeguards to taxpayers is “unjustifiable”.
While it accepts the proposals as a temporary solution to stop the courts getting “jammed up” by outstanding cases, the Institute said it is opposed to them being used on a wider scale and added that, “without exception”, its members have expressed deep concerns about the lack of safeguards in them and what they see as the “erosion of the principles of a fair justice system”.
However, it accepts that in some, but not all, of these cases there is undoubtedly an intention on the part of the taxpayer to delay the appeal and consequent payment of tax, so it is reasonable for the Government to be robust in tackling the issue.
The proposals link together similar cases so that a court ruling against one taxpayer also applies to any ‘follower cases’. These often involve hundreds of taxpayers using the same scheme or a close variant of it from the same company. All involved will then have to pay up.
The Institute of Chartered Accountants in England and Wales (ICAEW) has also attacked the plans, saying that, “in principle we believe that retrospective legislation of this nature is wrong.”
However, the Treasury has described the proposals as “effectively an extension of the terms and conditions taxpayers may have to accept when deciding to use an avoidance scheme” and therefore do not change the underlying tax rules.