MPs to quiz paymaster general over tax avoidance

Paymaster general Dawn Primarolo’s next grilling by MPs is likely to include
a probe into the raft of tax avoidance measures issued by HM Revenue &
Customs, when she is hauled before a Commons sub-committee in a few days time.

Primarolo is due to face difficult questions at the hearing next Wednesday.
Michael Fallon, chairman of the Treasury sub-committee, told Accountancy Age:
‘The two big issues are the tax credits regime and the need to bed down the
Revenue & Customs merger.’ Fallon added that tax avoidance could well be on
the agenda.

HMRC has been under scrutiny ever since director general Dave Hartnett
revealed, in an exclusive interview, that the department planned to make tax
avoidance ‘not
worthwhile’ by 2008.

It also emerged this week that HMRC has set a deadline of 9 December for City
banks to pay outstanding NICs liabilities in cases in dispute over adjustable
options schemes and conditional share schemes.

The schemes are thought to have used employee benefit trusts, the
vehicles that were the subject of the Dextra case, which recently went in HMRC’s

Hundreds of millions of pounds are said to be at stake, and the dispute will
go before the special commissioners in early December if the banks opt to
litigate rather than pay before HMRC’s 9 December deadline.

HMRC said the Dextra decision could be relevant to the banks’ case. ‘If it is
established in the litigation that the funds in question were not the payment of
relevant emoluments then, in accordance with Lord Hoffman’s judgment, they never
become deductible at all,’ a spokesman said.

HMRC has had talks with insurers over the potential impact of new
anti-avoidance provisions. The rules attack reserving tricks used by insurers
that HMRC believes have been designed to avoid tax. Future talks will determine
the cost of the new rules.

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