CIOT president attacks loan charge legislation

The president of CIOT, Ray McCann, has told the Treasury sub-committee that the government’s approach to tackling disguised remuneration was ‘worse than retrospective legislation’ in that it removed the legal protections provided to taxpayers

According to McCann, HMRC’s approach towards investigating cases from 12 years ago raised significant issues. ‘In reality the retrospective effect does displace all the protections that taxpayers are given by parliament in terms of getting certainty for their affairs in the past.’

Simon Clarke MP raised the question of whether the rule changes were ‘retrospective legislation’, a claim denied by the government. McCann replied that ‘I do not think it is retrospective legislation as we understand that. Let’s say that this type of loan arrangements appeared in 2011. The legislation does not make them taxable in 2011, which would be retrospective legislation, but it undoubtedly does have a retroactive effect because it will tax the loan made in 2011 regardless of the fact that it does not go back that far.

‘I would say that it is worse than retrospective legislation, because it displaces all of protections that parliament has put in place. Those protections will or will not be available to the taxpayer depending on their behaviour.’

He also expressed concerns that the government’s approach to solving the issue had given HMRC excessive powers. ‘The way this legislation has been enacted is not something that we should allow to go on without criticism, because if what it does in relation to the laws of the country and how far back HMRC can go to collect tax based on an individual’s behaviour.’

Clarke also asked what the tax profession’s view of retrospective legislation was. McCann replied that ‘As a general principle we object to retrospective legislation because of the impact on taxpayer’s certainty. Nevertheless, we cannot object absolutely because parliament has to be able, from time to time, to decide that something is so egregious that retrospection is required…but it should be a high bar, and parliament should not be able to pass retrospective legislation willy-nilly’.

He also said that it was difficult to express sympathy about those who used the schemes. ‘There is culpability on the part of those that have used these arrangements - that many of them have simply closed their eyes to the fact that they get a very advantageous tax position and a very advantageous national insurance position and have been prepared to go along with promoters… in some of the cases I have looked at, by and large they will say anything to sell that scheme’. He said that often the claims made by promoters of these schemes were ‘outlandish at best’.

Wes Streeting MP asked why such arrangements were popular. McCann explained that they were easily-accessed and readily available. ‘HMRC at one time described such schemes as “plug and play” - you just had to sign on the dotted line, pay whatever fee was involved, and you were away. That is why they gained popularity, and they kept being popular because the fixes that were put in place were never quite there.’

Report by James Bunney

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