I got more than a little annoyed in yesterday’s blog, with the FSA arbitrarily changing the rules to suit some political agenda without considering the likely impact. Then I read a piece from the Daily Telegraph’s Robert Winnett about HMRC’s latest brainwave and even my normally unflappable demeanour was sorely tested.
Tax inspectors have been given draconian powers to pursue people who have not broken current laws but may be in breach of future legislation which has yet to be drawn up by Parliament.
We have to assume that the DT’s journalists are not totally incompetent, so there has to be a grain of truth in the story. One paragraph in particular, quoting HMRC’s own words, caught my eye:
Avoidance is not defined in the Taxation Acts. One definition is ‘a situation where less tax is paid than Parliament intended, or more tax would have been paid, if Parliament turned its mind to the specific issue in question’. At a practical level the problem is then essentially one of deciding what Parliament would have intended and identifying who should be asked to decide this.”
So let’s consider what this says about the attitude of HMRC.
Firstly, avoidance is not defined in the Taxation Acts. Well there’s one fairly obvious conclusion to that, it’s that avoidance is not illegal. It is in fact entirely permissible and expected. A former Chancellor stood in Parliament in the 80s, at the time that married couples’ taxation was being separated, and stated quite clearly that people are perfectly at liberty to arrange their affairs to minimise their tax liability. So why are HMRC worried about a legal activity not being prevented in Law?
Secondly, “One definition is a situation where less tax is paid than Parliament intended”. Excuse me? Parliament hasn’t said anything on this subject, but we think they should have done so we will pretend they did. So does that mean that if HMRC decide that people should only bank with Lloyds, as our very own nationalised bank, that everyone else should pay 15% of their income in taxes because they aren’t contributing to Lloyds profits? Well of course it does, it’s just that Parliament hasn’t thought of it yet.
And finally, HMRC apparently intend investigating people who are breaking the rules that Parliament hasn’t yet thought of. So I hope you don’t claim your tax free allowances, because that is clearly a severe form of tax avoidance and Hector will be knocking on your door any day now.
Give me strength. When did HMRC decide they were in charge?