This might be a longer response than you intended. But I think it would be unfair of me to give you one that neatly fits into 280 characters or fewer. At least, when I finish this, I will be off Twitter at least until next week - so no need to digest it all at once.
1. I am on the record as having said (and I continue to say) that my professional experience tells me that it will often be unwise for taxpayers to provide documentation to HMRC to which they are not entitled.
2. In other words, it does not matter how comfortable you are with your position, there is no need to give HMRC material on a purely voluntary basis. And taxpayers who do often regret it later on.
3. That does not mean that I routinely advocate taxpayers wait until formal information notices. Generally, if HMRC would be entitled to the information then I would encourage taxpayers to comply with requests before one gets to the formal stage.
4. On the other hand, I am equally of the view that no taxpayer should adopt a tax position that they do not think would withstand full scrutiny. And, given my work in the field of discovery, I favour full disclosure as a general rule.
5. I am prepared to say that relying on any arrangement which depends on only partial disclosure is approaching (if not reaching) the level of dishonesty that amounts to common law cheat.
6. I am not prepared to say whether "Mr Red" in Murray Holdings was in that category. It is possible that he was merely adopting (and then extending) the approach I suggest at 1 above.
7. I do think however he took it too far, given the fact that statutory information notices were not complied with and, as a former Council member of the CIOT, I am uncomfortable with his conduct as described. Of course, I have no first-hand knowledge of what went on.
8. However, this perhaps all misses the point which is to discuss whether tax avoidance schemes are illegal or unlawful.
9. For these purposes, it is important to be clear about terminology.
10. For example, suppose X pays Y a salary of £2,000pcm but dishonestly describes £1,000 as tax-free gift to avoid PAYE/NIC, that is clearly illegal/unlawful conduct and X could be brought before a criminal court.
11. If X is a little more devious and hides this deception within a more complicated set of arrangements, I would say that the arrangements are merely an element of X's illegal/unlawful conduct.
12. The illegality/unlawfulness is not the "arrangements" but in X's conduct which in this case includes the arrangements.
13. Let's now consider the kind of arrangements that led to the GAAR being enacted, those entered into by Mr Mayes. bailii.org/ew/cases/EWCA/…
14. For these purposes, we can probably agree that those arrangements amount to tax avoidance (egregious or otherwise).
In that case, those arrangements were held to be effective in reducing the taxpayer's liability.
In that case, those arrangements were held to be effective in reducing the taxpayer's liability.
15. Presumably, therefore, it cannot be said that those arrangements were illegal/unlawful, even if they might not be widely socially acceptable.
16. Now let's consider a different set of arrangements which was litigated at broadly the same time, those undertaken by Mr Drummond: bailii.org/ew/cases/EWCA/…
17. Mr Drummond lost his case. Assuming equal candour in both cases, can it be said that there is any illegality/unlawfulness in Mr Drummond's case? I would say not.
18. Now, someone undertaking either set of arrangements might be more coy about disclosing the materials to HMRC or in a "white space" on a tax return.
19. I take the view that that coyness does not change the nature of the scheme. The scheme remains as legal/lawful as ever.
As I have said, any illegality/unlawfulness would be based on the taxpayer's overall conduct.
As I have said, any illegality/unlawfulness would be based on the taxpayer's overall conduct.
As the weekend approaches, I am feeling demob happy and may well have missed something in what is undoubtedly an interesting debate. However, I hope that the above clearly sets out my position.
[JUST ONE MORE TWEET TO GO]
[JUST ONE MORE TWEET TO GO]
Ideally, we might establish more common ground. But, if not, I hope we can continue to explore this in the coming days/weeks. I have numbered the points to make it easier for you to say where you agree and where you disagree.
Enjoy the weekend!
Enjoy the weekend!
