As we recently reported, HMRC have been granted extensive new tax collection powers which include taxpayers having to pay tax bills within 3 months, or face having the money removed from our current accounts and ISAs. We could also face additional charges and fines if HMRC think that we have been abusing the tax relief system.
If you want to challenge the amount that is being demanded, then you will need to enter the appeals process after making the payment. HMRC are obliged to repay you in full if it is discovered that its initial calculations were incorrect. £28 million has already been paid back to taxpayers who have been wrongly billed by HMRC and they lose 20% of the tax avoidance cases that are taken to court.
As reported in The Telegraph, Richard Morley, a partner at BDO accountancy firm, said that many of his clients have received a so-called ‘accelerated payment notice’ containing such unsound calculations that they were wide of the mark by tens of thousands of pounds! He adds, “Just as HMRC is about to be given the power to raid peoples’ bank accounts, they have been given the go-ahead to pursue billions in tax it thinks people owe.”
One section of taxpayers that are being pursued by HMRC using these new regulations is those who invest in ‘creative industries’, like film-making. Due to the risk involved in these fields, there are often decent tax breaks to compensate for any losses made. 154 people who had been part of Ingenious Media investments are being chased by HMRC for, reportedly, tens of millions of pounds in ‘avoided’ tax. They have been served accelerated payment notices which means they need to make full payment within 90 days, or face having the money taken directly from their bank accounts. They brought a case before Judge Ingrid Simler in the High Court claiming that this was an “unreasonable” power for HMRC to hold and that it “breached natural justice and represented an abuse of their rights”. Their claims were rejected.
This leaves one of these investors, Nigel Rowe, with a bill for £270,148 for a tax relief claim he made 12 years ago on his investment with Ingenious Media. He argued that he felt he had done nothing wrong and that “the Labour government encouraged investment in the British film industry”. At the time, Mr Rowe also felt that his money would “contribute to generating employment and tax revenues in excess of the original relief granted”. Rather unsurprisingly he said that the newly issued accelerated payment notice for this large amount would “cause him hardship”.
HMRC tax avoidance schemes
HMRC’s reaction to the ruling is that it is “important” because “those who use tax avoidance schemes need to know that they can no longer hold on to their money while their affairs are investigated. They have to pay their tax upfront like everybody else.”
But it is this ‘direct recovery of debt’ power that has angered so many people who consider it to directly contravene our 800 year old property ownership rights enshrined by the Magna Carta. The right to challenge the tax bill you are issued is, effectively, gone. You must pay whatever figure the notice states within 90 days or the money will be directly seized from your bank account. Only then will you be able to make an appeal through the court if there have been miscalculations on the part of HRMC.
HMRC are embracing their new powers enthusiastically saying, “We expect to complete the issue of around 64,000 tax notices by the end of 2016, bringing forward £5.5 billion in payments for the Exchequer by March 2020.” And taxpayers involved in investment schemes are only the tip of the tax avoidance iceberg!
