One minute with Ray McCann, president of the Chartered Institute of Taxation.
If you could make one change to a tax law or practice, what would it be?
I would try to restore a sense of reality to the UK tax system. The decision in Wilkinson [2005] UKHL 30 caused a whole scale change in the attitude and approach of HMRC. The case involved a widow’s bereavement allowance and some of my then colleagues in the Revenue approached the decision with almost a complete lack of understanding of what eliminating discretion would mean in the ‘real world’. What was most alarming was the complete loss of context and the Revenue’s position that whatever discretion it had did not extend to giving a relief that Parliament had not provided. Extra statutory concessions were washed away, removing the ‘oil’ that sometimes allowed the wheels of the tax system to turn.
We should be under no illusion. The spate of critical tribunal judgments on penalties are a direct result of an HMRC culture whereby inspectors feel duty bound to pursue tax or penalties simply because it thinks they are due, and too many find it difficult or impossible to back down. Equally, no matter how well intentioned or designed our laws, we cannot legislate for every eventuality. HMRC having greater principled management discretion is essential in my view.
What is the greatest challenge facing the UK tax profession today?
Finding a balance between tax planning and tax avoidance has never been more important, since the public judgment, in the form of Parliament and the media, on the role of ‘clever accountants and lawyers’ is more energised and the sanctions for crossing the line have never been as severe. It is not helped by HMRC pronouncements that somethings are ‘too good to be true’. Some things are too good to be true but many of them are perfectly legitimate under the rules as they stand. The fact remains that an individual with any complexity in his or her tax affairs who does not take professional advice from a qualified adviser will most likely get it wrong and pay too little (leaving them exposed to penalties) or too much. We also must also recognise that concern over tax advisers who are not qualified is growing and we need to find ways of encouraging such individuals to join a recognised professional body.
Is there anything you know now that you wish you’d known at the start of your career?
The importance of taking your professionalism very seriously and the advantages that becoming a CTA brings in terms of knowledge, approach, network and all round ability to operate right from the start. It is only in retrospect that the benefits, in terms of career development and opportunity, are clear. I would encourage anyone just starting out, and especially those in HMRC, to consider the ATT and CTA qualifications. I waited four years before being forced by events to up my game and I have never regretted doing so.
Are there any new or draft rules that are causing a particular problem?
I am bothered by the new penalties that will apply from October in relation to offshore matters. I don’t have an issue with HMRC being able to impose sky high penalties in appropriate circumstances, but having a minimum penalty of 100% that will apply not just going forward but to past errors seems to me counterproductive. It is likely to encourage even more determined efforts to keep foreign assets hidden. We should be encouraging UK taxpayers to come clean and reserving significant penalties for those who have to be forced to do so.
Is there a recent tax case has caught your eye?
There have been a spate of tribunal decisions involving penalties that have caused me some concern, especially the critical comments made by tribunal judges about HMRC’s handling. I do think it’s outrageous when HMRC finds or makes it impossible to resolve an issue without reliance upon a tribunal process. I have seen in my own practice that too often HMRC appears to stop listening to the taxpayer and, more importantly, critically questioning its understanding of the facts and law. I would like to think it will change and I have seen some softening in HMRC’s stance but not enough.
What in your area of practice is causing concern?
I have spoken to a fair number of taxpayers who have been involved in various employee benefit trust (EBT) structures. I have no doubt that the 2019 loan charge on outstanding EBT loans is of huge concern to many of those involved. Whilst it is difficult to have a great deal of sympathy for someone who knowingly entered into aggressive tax avoidance, there are so many affected by this change that there are bound to be a large number of difficult cases. Many will find it very hard to pay the tax and I did find it extraordinary that the HMRC impact assessment for this change envisaged insolvency as a consequence. I am not sure that ministers should easily sign off a change in law expected to increase bankruptcies, and all the more so since this issue is the result of multiple points of failure within the tax system over a long period.
I understand that HMRC will be extending time to pay arrangements but it will increase HMRC’s workload when it is already stretched; and with most of the promoters of these schemes long gone, the whole episode should be a warning to anyone tempted by such schemes. Compared to what was offered to users of older EBTs, the settlement opportunity here was not particularly generous and, whether justified or not, there seems to be a deep sense of injustice and bitterness.
Finally, you might not know this about me but…
I like to go hill walking with a group of current and former HMRC inspectors. We started out in 2000 when as a Revenue team we completed the Three Peaks Challenge, raising over £8,000 for charity. Since then, we have travelled all over the UK and Europe, although these days the treks have been less adventurous. One of our group completed all of Wainwright’s Lake District walks last year, and I joined him on a few. To steal Malcolm Gunn’s comment about our efforts in 2000, these days we do ‘make mountains out of molehills’! I also play the guitar, very badly, listen to lots of music and I have just returned to vinyl records. Sometimes the old ways have a lot to commend them!
One minute with Ray McCann, president of the Chartered Institute of Taxation.
If you could make one change to a tax law or practice, what would it be?
I would try to restore a sense of reality to the UK tax system. The decision in Wilkinson [2005] UKHL 30 caused a whole scale change in the attitude and approach of HMRC. The case involved a widow’s bereavement allowance and some of my then colleagues in the Revenue approached the decision with almost a complete lack of understanding of what eliminating discretion would mean in the ‘real world’. What was most alarming was the complete loss of context and the Revenue’s position that whatever discretion it had did not extend to giving a relief that Parliament had not provided. Extra statutory concessions were washed away, removing the ‘oil’ that sometimes allowed the wheels of the tax system to turn.
We should be under no illusion. The spate of critical tribunal judgments on penalties are a direct result of an HMRC culture whereby inspectors feel duty bound to pursue tax or penalties simply because it thinks they are due, and too many find it difficult or impossible to back down. Equally, no matter how well intentioned or designed our laws, we cannot legislate for every eventuality. HMRC having greater principled management discretion is essential in my view.
What is the greatest challenge facing the UK tax profession today?
Finding a balance between tax planning and tax avoidance has never been more important, since the public judgment, in the form of Parliament and the media, on the role of ‘clever accountants and lawyers’ is more energised and the sanctions for crossing the line have never been as severe. It is not helped by HMRC pronouncements that somethings are ‘too good to be true’. Some things are too good to be true but many of them are perfectly legitimate under the rules as they stand. The fact remains that an individual with any complexity in his or her tax affairs who does not take professional advice from a qualified adviser will most likely get it wrong and pay too little (leaving them exposed to penalties) or too much. We also must also recognise that concern over tax advisers who are not qualified is growing and we need to find ways of encouraging such individuals to join a recognised professional body.
Is there anything you know now that you wish you’d known at the start of your career?
The importance of taking your professionalism very seriously and the advantages that becoming a CTA brings in terms of knowledge, approach, network and all round ability to operate right from the start. It is only in retrospect that the benefits, in terms of career development and opportunity, are clear. I would encourage anyone just starting out, and especially those in HMRC, to consider the ATT and CTA qualifications. I waited four years before being forced by events to up my game and I have never regretted doing so.
Are there any new or draft rules that are causing a particular problem?
I am bothered by the new penalties that will apply from October in relation to offshore matters. I don’t have an issue with HMRC being able to impose sky high penalties in appropriate circumstances, but having a minimum penalty of 100% that will apply not just going forward but to past errors seems to me counterproductive. It is likely to encourage even more determined efforts to keep foreign assets hidden. We should be encouraging UK taxpayers to come clean and reserving significant penalties for those who have to be forced to do so.
Is there a recent tax case has caught your eye?
There have been a spate of tribunal decisions involving penalties that have caused me some concern, especially the critical comments made by tribunal judges about HMRC’s handling. I do think it’s outrageous when HMRC finds or makes it impossible to resolve an issue without reliance upon a tribunal process. I have seen in my own practice that too often HMRC appears to stop listening to the taxpayer and, more importantly, critically questioning its understanding of the facts and law. I would like to think it will change and I have seen some softening in HMRC’s stance but not enough.
What in your area of practice is causing concern?
I have spoken to a fair number of taxpayers who have been involved in various employee benefit trust (EBT) structures. I have no doubt that the 2019 loan charge on outstanding EBT loans is of huge concern to many of those involved. Whilst it is difficult to have a great deal of sympathy for someone who knowingly entered into aggressive tax avoidance, there are so many affected by this change that there are bound to be a large number of difficult cases. Many will find it very hard to pay the tax and I did find it extraordinary that the HMRC impact assessment for this change envisaged insolvency as a consequence. I am not sure that ministers should easily sign off a change in law expected to increase bankruptcies, and all the more so since this issue is the result of multiple points of failure within the tax system over a long period.
I understand that HMRC will be extending time to pay arrangements but it will increase HMRC’s workload when it is already stretched; and with most of the promoters of these schemes long gone, the whole episode should be a warning to anyone tempted by such schemes. Compared to what was offered to users of older EBTs, the settlement opportunity here was not particularly generous and, whether justified or not, there seems to be a deep sense of injustice and bitterness.
Finally, you might not know this about me but…
I like to go hill walking with a group of current and former HMRC inspectors. We started out in 2000 when as a Revenue team we completed the Three Peaks Challenge, raising over £8,000 for charity. Since then, we have travelled all over the UK and Europe, although these days the treks have been less adventurous. One of our group completed all of Wainwright’s Lake District walks last year, and I joined him on a few. To steal Malcolm Gunn’s comment about our efforts in 2000, these days we do ‘make mountains out of molehills’! I also play the guitar, very badly, listen to lots of music and I have just returned to vinyl records. Sometimes the old ways have a lot to commend them!
