Written by: Keith Tully
Reviewed: Thursday 20th November, 2014
Actions being taken to tackle tax avoidance among UK companies and individuals is progressing at an “unacceptably slow” rate, members of parliament have told HM Revenues & Customs (HMRC).
The situation is putting tax revenues to the Treasury at risk and ought to be seriously addressed, according to Margaret Hodge, who chairs the UK parliament’s Committee of Public Accounts.
A high-profile tax avoidance scheme called ‘Liberty’, which was reportedly used by the likes of singers George Michael, Katie Melua and Geary Barlow, was singled out as an example of HMRC’s systematic failings in recent years.
The scheme is believed to have helped shelter around £1.2 billion from the Treasury and despite being shut down in 2009, it was not taken to a tribunal until this year, with the delay having meant a 12-month deadline for HMRC inquiries came and went.
“This may be just the tip of the iceberg,” Hodge said of the Liberty scheme and the issues it entailed.
As well as celebrities and other individuals, HMRC is also not doing enough to clampdown on the tax avoidance efforts of companies that make significant profits in the UK, according to Mrs Hodge and her committee.
“Some international tax experts believe that the UK’s tests for companies to gain tax residency are less rigorous than in other EU jurisdictions,” Hodge said.
“Research into seven companies who have recently relocated to the UK for tax purposes showed very little inward investment was generated or jobs created in the UK in return for the tax benefits the companies receive,” she said.
She went on to insist that HMRC should provide more evidence and detail about how it aims to identify and address the ways in which international tax structures are used to leave companies with unreasonably small UK tax bills.
In a concluding report, the Committee of Public Accounts went on to welcome HMRC’s use of Accelerated Payment Notices (APNs), which are a legally-backed means through which British companies can be issued with demands for payment of tax liabilities owed to the Crown within 90 days.
The notices are designed to speed up the payment of monies that the companies involved might have thought to be protected through tax planning schemes but which HMRC now deems to have been used for unlawful avoidance.
APNs are being sent out to British companies with increasing frequency as a key part of HMRC’s ongoing clampdown on tax avoidance among businesses. Generally these letters are preceded by notices informing the relevant parties of what taxes they are liable for but there in some cases they can nonetheless result in debts that cause very serious financial problems for companies of any size.