Neal Todd, partner at Berwin Leighton Paisner, said the proposals were a “sticking plaster” to wider tax problems, and suggested a reform to the current tax system as an alternative solution to tax avoidance.
The proposals, which are expected to get Royal Assent next month, will allow HMRC to use rulings made in “follower cases”, existing cases which have already been settled, as a basis for forcing the payment of up to 50% of any contentious tax in similar cases, before a hearing has been reached.
Those who believe they have been wrongly charged will then have an opportunity to appeal against rulings after they have made their payments.
'Worst case scenario'
Todd said that under the new system HMRC may charge a “worst case scenario” figure, which could potentially be much higher than the amount a person would have settled for under the current system.
“If this happens, people will take action. I don’t think people will give up as easily as [HMRC] think,” he said.
“Taxpayers who receive accelerated payment notices and disclosure notices will be unlikely to take them lying down. Appeals against follower notices, judicial review applications against accelerated payment notices and a renewed urgency by taxpayers to bring their cases to court, so that a judge rather than an HMRC inspector can determine the matter, seem certain."
He said there were constitutional issues with HMRC ‘turning up and demanding cheques’ because of the drastic changes that have occurred in the “culture of tax planning” over recent years.
“The fact that HMRC now have this as a weapon is almost unconstitutional as it takes a retrospective view. Things will come up in the courts that were done a long time ago when things were different,” he said.
He also suggested that the use of follower cases suggested that the current tax system is overcomplicated and outdated: “By stoking the debate, perhaps [politicians] have turned people’s attention away from the real problem of how complex the system has become,” he said.
“It is an unhelpful development in the relationship between the Government and the public.
“I think that if we have got to a point where the Government feels it needs to do this then we have got a tax system that is too complicated.”
Inconvenience
The proposals have previously faced criticism from Andrew Watters, director and tax expert at leading law firm Thomas Egger LLP, who said they were a result of HMRC’s “frustrations” at the current system.
“In a balanced playing field, one might think that when the taxpayer wins the HMRC should pay a penalty for inconveniencing the taxpayer and forcing him to litigate. No such plans have been proposed,” he said.
