Tories claim avoidance clampdown is unethical

Link: Detox for the tax avoidance industry

Shadow chief secretary Howard Flight announced the appeal to the Joint Lords and Commons Committee during a furious row in which he accused paymaster general Dawn Primarolo of ‘moral preaching’ and ‘being dangerously glib and self-righteous’.

He launched the protest during debates in the Commons Finance Bill Committee on provisions restoring capital gains tax to property transactions involving avoidance schemes using the interaction of main residence relief and gifts relief.

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It follows similar opposition concerns over the way the government is overturning parents’ use of schemes to avoid or minimise inheritance tax for family trusts, imposing tax on schemes that were perfectly legal when they were first put in place,

Flight said his appeal to the committee is based on leading counsel’s opinion.

He protested: ‘The paymaster general thinks she is being very clever by finding a route to make measures retrospective that are technically only retroactive.’

He taunted her with Labour’s own VAT avoidance on a former party HQ and said: ‘The government’s measures are contrary to British traditions, and we will see what the Joint Committee has to say about the presentation of what is retrospective or retroactive.’

Primarolo retorted, saying that those who entered into an arrangement to avoid tax, who then found the way blocked, should not be allowed to undo what they had done – because it was not going to work – and try something else.

She said: ‘We would be saying to those who seek, through tax planning, to avoid tax for which they are clearly liable, ‘If you don’t manage it on the first go, don’t worry, we’ll let you take another run at it by undoing the arrangements that you originally put in place and seeing if there is something else you can do to avoid it.’

The minister added: ‘I am very firm on this point and will continue to echo it through the stages of the Bill. The clear message to those who want to tax plan is that you can tax plan, but if we change the system you are stuck with your choices. That is perfectly reasonable. That is life.’

She said people took advice before entering schemes and knew the consequences if a government should move ‘to ensure the tax system operates properly’.

Labour MP Rob Morris accused Flight of taking ‘cheap political shots; over his party’s HQ and VAT.

Flight said governments were entitled to close down avoidance schemes ‘going forward’ from the date of the announcement that they were going to act but not to take measures ‘that effectively cast back to when whatever was done was perfectly legal’.

But he did not press the issue to a vote.

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