HM Revenue and Customs should be doing more to catch the wealthy mitigating their tax bills because they are ‘running rings around the law’, say influential MPs.
Former Labour minister Margaret Hodge, who chairs the public accounts committee, claims dubious tax schemes cost the country at least £5 billion every year.
The public accounts committee (PAC) is calling for taxpayers taking part in schemes to mitigate their bills to be ‘publically named and shamed’.
She also slammed HM Revenue and Customs’ ‘appallingly bad record’ at closing tax mitigation firms, as only 11 people have faced the courts for promoting the schemes since 2004.
In the report, the committee acknowledges selling tax mitigation advice is profitable – as those promoting the schemes generally charge up to 20% of the tax saved.
Name and shame
Mrs Hodge said: “These schemes create loopholes in legislation or abuse tax reliefs and they then sign up lots of clients safe in the knowledge that it will take HMRC time to change the law to close down the scheme.
“Those who are taking advantage of this opportunity are making money at the expense of the UK taxpayer.
“HMRC is losing this game of cat and mouse because the promoter simply moves on and repeats the process with a new scheme.”
The report says tax law is too complex and there are no penalties to prevent firms promoting tax mitigation, while HMRC is ineffective in challenging promoters.
Government ban
The report also notes that the promoters get paid whether the schemes work or not.
Mrs Hodge said: “To discourage these schemes, HMRC should publically name and shame anyone using them to discourage the activity and with £5 billion being lost in tax avoidance every year then HMRC must be more robust in how it approaches this issue.”
Another issue highlighted in their report is that the scheme’s promoters are escaping fines for non-disclosure because they believe they have a ‘reasonable excuse’ for not doing so.
Since a committee launched its investigation into tax avoidance schemes, the government has announced proposals to ban firms promoting them from being awarded government contracts.
