HMRC turns a blind eye to 41,000 cases of high-level tax avoidance?
More proof that only the rich can afford to avoid tax was published in a new report by the National Audit Office (NAO) this week. The watchdog organisation, which has previously criticised HMRC for its ‘sweetheart’ deals with big business, identified 41,000 cases of contrived tax avoidance, which HMRC have no plans to do anything about.
HMRC have recently set up a specialised unit targeting the very wealthy (who are generally the only ones who can afford to use such aggressive schemes) and claim to have collected an additional £200 million in ‘avoided’ tax in 2011/12. However, there are 41,000 cases where they cannot say how they are going to collect more tax. While 41,000 cases may not sound a lot, to put it into perspective, it is believed around 1,000 people were using the Jersey K2 scheme made famous by Jimmy Carr. The total amount sheltered by those 1,000 is estimated at around £168 million.
But what the NAO report highlights is the fact that HMRC can’t seem to do anything, even when they know about tax avoidance. The audit office found that more than 100 new avoidance schemes have been disclosed, under HMRC disclosure rules, in each of the last four years. HMRC apparently believe they would win if the cases were taken to court and the NAO agreed that HMRC had “a good success rate when it litigates, its investigations can take many years to resolve and it cannot always successfully apply the rulings in lead cases to other cases”. Without resorting to the expensive business of litigation, against taxpayers with deeper pockets than HMRC, there seems to be no other plan of action, even where they know all about a scheme.
Amyas Morse, the head of the audit office, said: “HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes. Though its disclosure regime has helped to change the market, it has had little impact on the persistent use of highly contrived schemes which deprives the public purse of billions of pounds.
“It is inherently difficult to stop tax avoidance as it is not illegal. But HMRC needs to demonstrate how it is going to reduce the 41,000 avoidance cases it currently has open.”
A revenue spokesman told The Telegraph: “The Disclosure of Tax Avoidance Schemes regime (DOTAS) has enabled HMRC to successfully challenge over 40 tax avoidance schemes through the courts in the last two years and successfully disrupted the avoidance industry through a combination of legal challenge and improved intelligence on new schemes. But as the avoidance landscape changes, so must it. The Government is building on DOTAS to give HMRC stronger powers.
“These, together with the introduction of an anti-abuse rule in 2013, will further strengthen our anti-avoidance work.”
Mmm-hmm. Sounds like an open invitation to anyone with enough cash to do what they like, confident that HMRC will sit on their hands while ordinary people who pay tax under PAYE pay every penny they owe. And let’s not even guess how much tax is avoided through the schemes they don’t know about…