1/x I feel it appropriate to speak out if, as is the case here, I believe MPs are being misled. Of course, I do not know who drafted the objections. I will assume it was by HMRC/HMT.
2/x For present purposes, I am focusing on NC31.
These briefing objections are just wrong.
These briefing objections are just wrong.
3/x The objection notes the fact that the clause “would require HMRC to make an assessment of what a taxpayer knew or thought at the time of submitting their tax return”.
4/x The objection expresses doubt as to whether “it is possible for HMRC to know what a taxpayer knew at the time they filed their self assessment”.
5/x It argues that “HMRC has no way to tell what advice taxpayers have sought or were given, let alone what a taxpayer understood their position to be at the time”.
6/x If those objections were genuine, then it would undermine section 77(4A) of the Value Added Tax Act which was enacted in the Finance Act 2008.
7/x That section gives HMRC a 20-year assessment period in a case where the taxpayer “participated in a transaction knowing that it was part of arrangements … intended to bring about a loss of VAT”.
8/x That section as do the discovery assessment rules also permit HMRC to assess in cases where the taxpayer has acted deliberately to under-assess his/her tax. Again that test turns on the taxpayer’s knowledge at the time the return was made.
9/x If it is really believed by HMRC that “HMRC has no way to tell what advice taxpayers have sought or were given, let alone what a taxpayer understood their position to be at the time”, then these longstanding provisions at the heart of the tax code are similarly flawed.
10/x I cannot believe that these objections really reflect what HMRC think.
That addresses the first and third bullets.
The second bullet is no better.
That addresses the first and third bullets.
The second bullet is no better.
11/x There is nothing in the clauses that creates some special exemption for offshore trusts. The clause provides an exemption for two classes of taxpayer: those who filed their tax return not knowing it to be wrong and those whom HMRC chose not to require to file a tax return.
12/x The location of any trust in the loan arrangements has absolutely no effect on the availability of the exemption. In fact, it appears that the reference to offshore trusts is merely a smokescreen because that terminology is emotive.
13/x However, to be fair, the statement in the second bullet is 100% accurate – even if 100% meaningless. If a taxpayer used an offshore trust and also knew that further tax was due, the clause will still require the taxpayer to pay the loan charge in most cases.
14/x The only exception (i.e. the situation which makes the statement technically accurate) is if HMRC had chosen not to request a tax return from the individual. In other words, it was because of HMRC’s decisions that no tax return went in.
15/x However, in such cases, the likelihood is that HMRC would have a full 20 years to assess the taxpayer in any event and so there is no need for the loan charge in such a case.
