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Pay Up Time for Offshore Loan Schemes – Says HMRC Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 24 July 2014 00:00

HM Revenue and Customs (HMRC) is today giving around 16,000 tax avoidance scheme users the opportunity to pay the tax they owe or risk facing bigger tax bills and heavy legal costs. The total amount of tax owed by these users is estimated at £430 million.

On average, each of the users of the contractor loan schemes covered by this settlement opportunity owes £11,000 a year in tax.

The schemes, used by a small minority of contractors to avoid paying their fair share, involve complex arrangements with individuals signing a contract of employment with an offshore employer. These are complex arrangements which involve individuals signing a contract of employment with an offshore employer. They then receive their remuneration from contracts in the UK through an offshore company or trust in what are claimed to be non-taxable loans, rather than as income. These are particularly aggressive schemes, used by the 1% of contractors who really do not want to pay their fair share.

The contractor then receives their pay through the offshore company or trust as what is claimed to be a non-taxable loan, rather than income.

Users will have until January 2015 to take up the settlement opportunity. If they do, they will pay the tax and interest due on the sums they received as loans under the scheme.

If they continue to challenge HMRC in the courts, they risk having to pay additional tax charges and penalties – as well as the costs of litigation if they lose.

Jennie Granger, HMRC Director General for Enforcement and Compliance, said:

"Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs. 

This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they've understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users."

HMRC is writing to all users who are being offered the settlement opportunity, explaining how they can resolve their case.  More information is available at Settlement Opportunity: Tax on Contractor Loans. If any users want to speak to HMRC about their case they should call the dedicated helpline on 03000 534226.This settlement opportunity applies to schemes used before the Disguised Remuneration rules were introduced in April 2011. Around 16,000 users can use the opportunity. However, HMRC will discuss settlement of all scheme use with anyone who comes forward during the settlement opportunity period.

HMRC offers settlement opportunities like this for some types of marketed tax avoidance schemes that have large numbers of users and where there is a range of possible outcomes in law. They are one of a number of tools HMRC uses for tackling tax avoidance. These also include the new Accelerated Payments powers introduced this month as part of the Finance Act. Under these powers, HMRC is able to seek upfront payments of disputed tax from members of avoidance schemes.

HMRC’s High Net Worth Unit Brings in £1 Billion Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 17 July 2014 00:00

HM Revenue and Customs’ High Net Worth Unit – a specialist division which deals with the tax affairs of the UK’s wealthiest individuals – has brought in £1 billion in compliance yield.

The unit, which was set up in 2009, deals with the tax affairs of the 6,200 wealthiest individual customers of HMRC – those with a net worth of £20 million or more.

Customers are assigned a relationship manager who has detailed oversight and develops a close understanding of the tax risks among these wealthy individuals. 

This maximises voluntary compliance of the majority of customers and enables HMRC to effectively challenge those who do not play by the rules. The High Net Worth Unit ensures good customer engagement with a focus on influencing behaviour to improve voluntary compliance.  

The compliance figure was revealed by David Gauke, Financial Secretary to the Treasury, as he spoke at HMRC’s annual stakeholder conference.

David Gauke said: 

“HMRC vigorously polices the rules ensuring it collects the tax that is due, and takes tough action against the minority who seek to avoid their responsibilities. This approach is clearly working as HMRC’s High Net Worth Unit has delivered £1 billion in compliance yield. This is against targets totaling £894 million and is further evidence that the government’s investment of nearly £1 billion in HMRC to tackle avoidance, evasion and fraud is paying off.”

Since 2009 the compliance brought in by the High Net Worth Unit has increased year on year to £268 million in 2013-14, a 20 per cent increase on the year before.

High Net Worth Unit compliance yield:





£268 million

£210 million


£222 million

£200 million


£200 million

£195 million


£162 million

£153 million


£85 million

£80 million

PAYE Tax Codes: HMRC Proposes to Give Itself a Breather – at Taxpayer’s Expense… Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Friday, 11 July 2014 00:00

“Put yourself in the taxpayer’s shoes”, Adjudicator tells HMRC. Now, how do you feel if HMRC cuts your tax code and takes 30 days to tell you..?

Well, it never rains but it pours. Yesterday we were busy with the Adjudicator’s report but we did not overlook something that HMRC published a couple of days ago, innocuously entitled: “Maintaining Customer Service Levels in Peak Periods – Draft Legislation”

At this stage, you might suppose that this was about HMRC raising its game to ensure that the taxpayer was provided with an adequate level of service – which would be most welcome. Unfortunately, you’d be wrong. This draft legislation is not about maintaining (acceptable) service levels at all, but rather reducing the standard to a level which HMRC thinks it might be able to cope with.

Coding Notices are one of the key ingredients of PAYE: it is HMRC telling the employer how much / what rate of tax to apply to an employee’s salary, or pensioner’s pension. It is the only warning a taxpayer gets that his or her take home pay is about to change.

HMRC proposes no longer to send an updated Coding Notice to the employee or pensioner, where HMRC thinks it will not affect the taxpayer’s net salary or pension. While this seems fairly tame, and to an extent understandable, the chances seem quite high that this will result in someone getting far less income than they expected, without any explanation. PAYE and RTI are hardly error-free.

Perhaps more worryingly, in terms of the number of taxpayers likely to be adversely affected, is the proposal that HMRC will send a revised tax code to the employer or pension provider, and give itself up to 30 days to tell the taxpayer. Bearing in mind that the employer will probably be advised electronically, but the taxpayer will be notified by 2nd class post via HMRC’s facilities – which are already notoriously slow – it seems quite likely that this will stretch the time to 40 days.

Which means that there could easily be two monthly salary payments, or 5 weekly wage payments, before the employee has some explanation as to why his or her take home pay has fallen through the floor.

Why HMRC thinks that this will reduce telephone enquiries is a mystery. Practically speaking, an employee concerned with a reduction in take home pay is likely to ask his or her employer first. Employers only receive the tax code itself, rather than the full explanation sent to an employee, so they will normally be unable to help, even if they want to, or have the time.

If the change in code results in only a small change in take-home pay, then perhaps it will be acceptable to an employee to wait 30-40 days. But if the change means the employee cannot pay his or her mortgage, then they might not be able to wait that long.

While HMRC may say that it will all come out in the wash at the end of the year, this is no consolation to someone who suddenly finds they cannot pay their rent.

While the explanatory memorandum emphasises this will not change an employee’s “right of appeal” against a tax code, HMRC seems incapable of grasping that the damage will already have been done. Given that PAYE regime allows HMRC to delve into a taxpayer’s pocket using estimated figures and on a provisional basis, it is clearly essential that a taxpayer be allowed the earliest available opportunity to dispute HMRC’s calculations.

But this draft legislation aims to do away with this perceived inconvenience for HMRC, so that it can say that it is meeting new, lower standards. Would it have been beyond their wit to ensure that they gave themselves that extra time only when it meant that they code was increased, so that it only applied when the taxpayer would end up better off..?

The Adjudicator’s Office 2014 Annual Report Published Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 10 July 2014 00:00

Judy Clements OBE, The Adjudicator for complaints about HM Revenue & Customs (HMRC), the Valuation Office Agency (VOA) and The Insolvency Service (The IS), publishes her 2013-14 Annual Report today. This is the 21st report since the formation of the office in May 1993.               

Judy Clements writes “I am very pleased to present my Annual Report for the year 1 April 2013 to 31 March 2014.  This is the sixth report I have presented about our work, and the 21st in the history of the Adjudicator’s Office.”

2013-14 was a very demanding and busy year for The Adjudicator and her office.

She goes on to say “This was the legacy from the exceptional workload received in 2012-13, from HM Revenue & Customs (HMRC) customers. In response we embarked on a Two-Year Recovery Plan that will take us through to March 2015.

My goal is always to provide the high standards of service our customers have the right to expect, and this has been at the heart of our work resulting in a new record in the 21 year history of the office for cases closed in a single year. We successfully resolved 2,350 complaints in the first year of our Recovery Plan.”  

A large number of the taxation cases reviewed related to PAYE and were considered under the provisions of HMRC’s Extra Statutory Concession A19 (ESC A19). The majority of Tax Credit complaints received by The Adjudicator are about HMRC’s refusal to write off overpayments.

The Adjudicator comments “The statistics from the work of my office are a stark reminder there is no place for complacency, particularly when this year 90% of HMRC customer complaints have been upheld…… We have successfully mediated 55% of cases received this year. I hope to see a significant reduction in mediated cases next year if all three departments continue to develop effective use of discretion and empower their front line staff to resolve issues at first point of contact, so customers feel the complaints process is timely and adds value.”

The Adjudicator has continued to build strong relationships with HMRC, the VOA and The IS and all have been receptive to her feedback for service improvement. The number of complaints referred to The Adjudicator by customers of the Valuation Office Agency and The Insolvency Service remained stable and total numbers were low.


1.    The Adjudicator’s Office was set up in 1993, to look into complaints about the Inland Revenue (including the Valuation Agency). HM Customs and Excise and the Contributions Agency joined in 1995. From April 2003 the office took on complaints about The Insolvency Service. In April 2005 the Inland Revenue and HM Customs and Excise merged to form HM Revenue & Customs (HMRC).

2.    Judy Clements OBE replaced the late Dame Barbara Mills DBE QC as Adjudicator in April 2009. She acts as an impartial referee when people are not satisfied with the way the departments have dealt with their complaint. She looks at complaints about handling issues, such as mistakes, delay, staff attitude, and quality of advice. She does not consider complaints about the law, or where an independent tribunal already exists for settling disagreements. Her recommendations are independent and her services are free to complainants.

3.    This report covers the period 1 April 2013 to 31 March 2014 and is available free of charge from the Adjudicator’s Office, PO Box 10280 Nottingham NG2 9PF. Telephone 0300 057 1111. It is also available electronically at

4.    Further information about the office (including leaflets on how to complain) can also be obtained from the above address or website.

5.    Statistics for the year to 31 March 2014 are below.

Statistics 2013-14(2012-13 in brackets)


HM Revenue

& Customs

Valuation Office Agency

The Insolvency Service


Complaints taken on for investigation

1087 (2574)

27 (23)

17 (15)

1131 (2612)

Investigation cases completed

2311 (1354)

23 (11)

16 (14)

2350 (1379)

Number upheld either partially or wholly


2073 (818)

5 (1)

6 (2)

2084 (821)


In 2013-14, The Adjudicator recommended HMRC pay a total of £246,094 in compensation to complainants for worry and distress and poor complaint handling (£81,309 in 2012-13). She also asked HMRC to reimburse £180,615 for direct costs (£207,108 in 2012-13).  The Adjudicator recommended that HMRC give up tax amounting to £1,899,780 (£210,138 in 2012-13) and that HMRC write off £2,042,769 in overpaid Tax Credits (£695,476 in 2012-13).

The Adjudicator recommended the VOA pay a total of £325 in compensation and £14,291 direct costs (previously no compensation or direct costs for 2012-13). The Adjudicator recommended The Insolvency Service pay £500 in compensation and £42,287 direct costs (£75 compensation and £1 direct costs in 2012-13). No recommendation was made for liability to be given up for either of these departments.

Adjudicator Upholds Record Number of Complaints about HMRC in 2013/14 Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Thursday, 10 July 2014 00:00

It seems TW’s not alone in being unhappy with HMRC at the moment: the Adjudicator has upheld 9 out of 10 complaints about HMRC in 2013/14.

HMRC has published a press release on the Adjudicator’s 2013/14 report – although it has not yet made it to HMRC’s website.

The report states that, in its busiest year ever for HMRC complaints, it has upheld 90% of them in favour of the taxpayer – up from 60% in the previous year. So, not only a record number of complaints dealt with, but a record number of complaints upheld. HMRC has also had to repay about £2million in tax - almost ten times the amount in 2012/13.

Unsurprisingly, the majority of cases were in relation to PAYE and Extra-Statutory Concession A19, whereby HMRC is supposed to give up tax when it fails to act on information it has received to collect tax in a timely fashion.

TW’s Mark McLaughlin had this to say:

“We at TaxationWeb – and numerous colleagues in the profession – have long been saying that HMRC has for several years been trying to marginalise claims under ESC A19.

It seems that this has come home to roost. The message from the Adjudicator’s Office seems quite clear: HMRC has – systematically, based on these numbers – wrongly applied ESC A19 to the detriment of taxpayers. It is extremely worrying to think that many thousands more honest taxpayers  will simply have accepted HMRC’s word, or had their claims turned down in the so-called “three tiers of refusal” which passed for its internal review procedure.

Reform is required – and not the “simplification” they tried to introduce a year or so ago, which was a thinly-veiled attempt to water down the rules in their favour.

Perhaps, most importantly, someone at HMRC needs to take responsibility and to say “sorry” for delivering such an astonishingly poor service to the taxpayer. While HMRC may try to argue that this is a very small percentage of the volume of cases it deals with, it is almost certainly a very small percentage of the many more people that have had their claims unfairly rejected. And let’s not forget, HMRC was supposed to apply this concession without having to be asked in the first place.”

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