Too much power?
The Economic Affairs Committee has said that HMRC has recently been given some broad powers without effective safeguards. HMRC have introduced high penalties which are designed to deter taxpayers from appealing. The committee has claimed that this a tax on justice and has demanded a review of the oversight of HMRC and its powers.
Lord Forsyth of Drumlean has claimed that ‘the balance has tipped too far in favour of HMRC’ in its bid to tackle tax evasion.
The loan charge is a new fee which has been brought in by HMRC to combat ‘disguised remuneration’ schemes. Under these schemes, workers were paid via a loan in order to avoid tax and National Insurance contributions. However, the charge has been criticised because it can be applied retrospectively – meaning people who may have been unaware they were breaking the rules can be targeted. Lord Forsyth went so far as to say that this charge is ‘devastating the lives of middle and lower income individuals.’ These people may have used these schemes after being required to by their employers.
The report strongly recommends that HMRC should urgently review loan charge cases and establish a helpline for those affected. This action should take place ‘well in advance’ of the loan charge coming into effect April 2019.
The Loan Charge Action Group have recommended that the charge be forward looking rather than retrospective. They have described it as ‘draconian’ as it allows HMRC to go back 20 years to demand payments for arrangements that were legal and never challenged by HMRC at the time. The charge will affect social workers, teachers, doctors, nurses and IT contractors who simply followed the professional advice they were given at the time.
However, HMRC claimed that disguised remuneration scheme users earned on average twice as much as the average UK taxpayer and that the schemes would ‘inevitably result in large tax liabilities.’
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