Budget war on tax avoidance plans ‘will end in court’

first_imgTax specialists have warned Chancellor George Osborne he can expect to be challenged in the courts over plans to clamp down on tax avoidance schemes.During his Budget speech today, Osborne said the ‘accelerated payments’ provision will become law this year for all tax avoidance schemes.The Treasury estimates the number of open avoidance cases is currently around 65,000 and the chancellor hopes his new crackdown will reduce that number.Osborne said: ‘If people feel they have been wronged, they can of course go to court. If they win, they get their money back with interest. We have already consulted on this idea; now we will implement it.‘The OBR [Office for Budget Responsibility] confirms that this will bring forward £4bn of tax receipts and it will fundamentally reduce the incentive to engage in tax avoidance in the future.’But tax experts have warned the government can face a legal backlash from those affected by the change.Hayley Kinghan, solicitor at QualitySolicitors Hill & Abbott said: ‘Tax avoidance is a serious issue which the government must tackle but this change suggested by the government goes against the principles of proving wrongdoing before issuing a punishment.‘Individuals could be hit with a tax bill going back several years, be expected to pay it and only get it back if it turns out to be a legal tax planning vehicle. I would not be surprised for the government and HM Revenue & Customs to be challenged in the courts on this decision.’Simon Wilks, tax partner at accountancy firm PwC, said the measure underlines the determination of the government to deal with tax avoidance.But he added that potential revenue is ‘very uncertain’ and might ultimately have to be repaid with interest. ‘Moreover, many will worry that this measure sets a concerning precedent that tax payers can’t pursue their legitimate cases through the courts.’Phil Berwick, partner at national law firm Irwin Mitchell, said taxpayers will be ‘in for a shock’ when they receive accelerated payment notices.‘They will have to find, collectively, and in many cases, individually, a large amount of money in a relatively short period of time.‘HMRC are pre-empting the outcome of litigation. HMRC’s position is that they don’t like taxpayers using avoidance schemes and the individual must pay the disputed tax before the tribunal has reached a decision, or even considered the effectiveness of the arrangement.‘That is hardly justice. Legal challenges to HMRC’s position can be expected.’last_img