Tax Avoider Asked to Sign a PledgeThursday, December 3rd, 2015
Well, it has emerged that this is exactly what HMRC did to one such individual.
“The letter was intended to make the recipient think more carefully about their tax arrangements, rather than to act as a legally binding document”, HMRC said.
However, the tone of the letter has been criticised as “schoolmasterish”
Tina Riches, a national tax partner at accountancy firm Smith and Williamson, told the Financial Times that “It smacks of being told to write lines,” She went onto say she “would urge a recipient not to sign the letter”
Neal Todd, a partner at law firm Berwin Leighton Paisner, backed her up when he said “while the letter indicated it would have no impact on the handling of future tax affairs, signing it could nevertheless leave someone a ‘hostage to fortune’”. He followed this by saying, “Even if you were a man of honour and abide by it, one man’s aggressive avoidance is another man’s sensible planning… The worry is that at a later date, HMRC takes the view that something is avoidance, and it could be rather damning if a serial avoider is seen to have gone against their word.”
It has been confirmed by HMRC that the sending of the letter was part of a series of measures aimed at discouraging the practice of avoidance and that the letter had only gone to one person.
A spokesman from HMRC said: “We have seen that behavioral insights works in dealing with tax avoidance. We know from experience that many people who get involved with tax avoidance schemes later regret the time and cost of disentangling themselves. We would rather people avoided that problem than the tax that will ultimately have to be paid.”
Avoidance of paying tax is not illegal in itself and neither there are many schemes that are acceptable and legal. If, however HMRC believe that the schemes are not being used in the manner parliament intended then they can come down hard.
- Tax avoidance – defined as being within the letter of the law
- Tax evasion – is illegal
Will this letter be used again? Quite unlikely a source from HMRC suggested. Why? Because it has been the subject of media reports.