ICAEW right to defend taxman’s efforts to curb avoidance

I WAS RELIEVED by the ICAEW’s decision to defend HM Revenue & Customs’ record on tackling tax avoidance following the Public Accounts Committee’s latest report on marketed schemes.

Of course, the taxman is far from beyond reproach – I have criticised it numerous times in this blog in the past – and by its own admission, it has plenty of ground to make up as it clamps down on the practice. That’s not in dispute at all.

Indeed, there are several elements of the committee’s criticism which ring true, too. The dice are indeed, to use Margaret Hodge’s turn of phrase, loaded in favour of the promoters of tax avoidance schemes; the promoters do create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those, and then sign up as many clients as possible, knowing there is a lag between the scheme’s establishment, its detection and eventual closure. But whose fault is that? It’s not the taxman’s. It doesn’t write the legislation – it just applies it.

The committee presumably, as a group of professional politicians, is aware of that, but that did not prevent it from laying the blame solely at HMRC’s door, something the ICAEW rightly branded “unfair and unrealistic” in a blogged response.

Then, of course, there is the sheer hyperbole it employs. It is exaggeration to suggest promoters of avoidance schemes are “running rings” around the taxman, just as it is reactionary to encourage the cultivation of public anger in order to shape policy around avoidance. Indeed, it is well-documented that the vast majority of schemes are defeated by HMRC in the tribunals. It’ll be a tough job running boutiques like the aptly-named No Tax Advisors at the moment.

Of course it is important to provide HMRC with additional resources to clamp down further on avoidance, but I feel perspective is required; avoidance has consistently been one of the smaller elements of the tax gap, regularly outstripped by inaccuracies, non-declaration and indirect taxes. Given the Public Accounts Committee’s remit – to ensure taxes are correctly collected and wisely spent – surely those areas should attract a greater proportion of its attention.

Calum Fuller is the tax correspondent for Accountancy Age and Financial Director

Related reading