Spring Budget 2017 and End of Year Tax Planning

This year’s budget did not bring a great deal for advisors to get their teeth into.  There are some points that will certainly affect millions of taxpayers though, so we have summarised the key points below.

There are also steps that taxpayers should consider taking before the end of the tax year, when various new rules and rates will come into effect.

  • The tax-free dividend allowance (the band on which dividends could be received free of income tax) is to be reduced from £5,000 to £2,000 from April 2018. Having only been introduced in April 2017 the allowance is already being reduced which will affect all taxpayers receiving dividends, including business owners and investors.


  • There will be a 1 year delay for quarterly reporting under the Making Tax Digital (MTD) rules for businesses that have a turnover below the VAT threshold (£85,000 for 2017-18). This will be good news for those businesses but unfortunately there do not appear to be any changes to these controversial proposals for other businesses.  Plus, the so-called pilot scheme will not have run its full course, so there is no chance of everyone learning lessons from the process.


End of Year Planning


  • Residential property rental. From April 2017 the phasing in of restrictions on relief for interest costs for higher rate taxpayers will begin. Initially 25% of such costs will be affected, however this will rise 25% each tax year until all higher rate relief on finance interest is blocked.


  • If pension contributions or pension scheme planning might be desired, setting up and contributing to a pension scheme before the end of the tax year (if one is not already in place) could ‘bank’ allowances for the year under the carry-back rules. Those with existing pension schemes have until the end of this year to use up any unused annual allowance from 2013-14.


  • If possible, consider declaring dividends where the tax free allowance of £5,000 has not been used up yet.


  • Consider new deemed domicile rules if non-UK domiciled. From April 2017 deemed domicile rules may apply to individuals who have been resident for 17 of the previous 20 years.  Previously these only applied to inheritance tax but the new rules extend to income tax and capital gains tax meaning those affected will have to report their worldwide income and gains on an arising basis.

The Result is in …..

We have opened the right envelope!

Congratulations and thank you for all who correctly entered our ‘Twelve Days of Christmas’ Quiz.  Eaves and Co are pleased to announce that the winner is Catherine Rogers of Ashford Rainham Ltd.  David Stebbings recently handed over her prize.


IMG_20170217_154204 (1)

For completeness here are the answers:-


The name Santa Claus evolved from Sinter Klass, a nickname for Saint Nicholas. What language is Sinter Klaas? Dutch


What fruit is traditionally used to make a ‘Christingle’?  Orange


Who ‘Rattle and Hum’ along to Angel of Harlem?  U2


Which carol is about a 19th Century Duke of Bohemia? Good King Wenceslas


“Christmas won’t be Christmas without any presents” is the first line from which literary classic by Louisa May Alcott? Little Women


Christmas Island, in the Indian Ocean, is a territory of which country? Australia


In the song ‘The Twelve Days Of Christmas’, how many swans were a-swimming? Seven


The North Pole, said to be Santa’s home, is located in which ocean? Arctic Ocean


The name of which of Santa’s reindeer means ‘Thunder’? Donner


Marzipan is made mainly from sugar and the flour or meal of which nut? Almond


Which traditional Christmas plant was once so revered by early Britons that it had to be cut with a golden sickle? Mistletoe


Who was Jacob Marley’s business partner?  Scrooge


The initial of each answer spells out DOUGLAS ADAMS.  The quote attributed to him on our website is ‘I’m spending a year dead for tax reasons’.

We are not, so look forward working with you again this year.  Remember the new tax year starts on 6 April.

The Dog Ate My….

The Dog Ate My [Homework] Tax Return


There has been much publicity recently regarding the funny [!?] HMRC Press Release regarding failed excuses for failing to file Tax Returns on time. Generally, the ‘joke’ seems to be that they are such poor excuses that they are on a par, or even worse claims that ‘The Dog Ate My Tax Return’. This shows the poor standard of education and lack of discipline in our schools. Anyone who has failed with that excuse at school should have at least graduated to ‘A Crocodile Ate My Tax Return’ with an invitation to the Tax Officer to go and retrieve it(!).

No doubt HMRC have much to put up with, and lousy excuses will inevitably test their patience. However, they are Civil servants who should be courteous and sympathetic to all tax payers – not just those they like because of them being ‘compliant’. With this in mind, I refer to the cases of P. Miller and Coomber. Case law shows HMRC are not always correct in their views on penalties. Advisors should always consider whether a penalty being charged is correct, proportional, or could even be suspended.

In the recent case of P. Miller the Courts held that HMRC were wrong in dismissing an application for a penalty to be suspended. The Judge followed the case of Hackett in focussing on the general obligations for all tax payers (rather than the narrow, specific facts of the tax payer’s own mistake) in deciding that there were sensible suspension conditions which could encourage him to avoid a future careless mistake. Thus the immediate imposition of a penalty liability could be avoided. No doubt good news for the tax payer.

HMRC had more success in the case of Coomber, where the Judge rejected a suggestion that a tax payer had a reasonable excuse for late payment when the tax cheque he had written was unexpectedly dishonoured by his bank. Reading the case in detail, it appears to be an object lesson in presenting all relevant evidence and ensuring it is correct in detail. Quoting from Clean Car Co Ltd, the Judge said, ‘The test of whether or not there is a reasonable excuse is an objective one … Was what the tax payer did a reasonable thing for a responsible trader, conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the tax payer, and placed in the situation the taxpayer found himself at the relevant time a reasonable thing to do?’

From the Judge’s comments it may have proved better for the tax payer if he had produced evidence of why the bank dishonoured the cheque (any why it was unexpected) plus better documentary evidence as to the precise dates of events. It is plain details can affect the Judge’s view as to the strength of a case. In this new era of quasi-automatic penalties advisors need to be on alert for sensible mitigating circumstances. Reasonable excuses do go beyond ‘Disaster, death and disease’, to quote the HMRC general view, but throw the excuse ‘A Crocodile Ate My Tax Return’ on the fire!

What are advisors current experiences of penalties and mitigation?

Private Residence Relief Denied – A Oliver

The tax law surrounding the sale of residences and Private Residence Relief continues to cause disputes between taxpayers and HMRC.  With the disparity between capital gains tax rates on most assets and the higher rate now applicable to sales of residential property, this is only likely to continue.

In a recent case at the First-Tier Tribunal (A Oliver, TC5521), the taxpayer purchased a flat in January 2007 and then sold it in April 2007.  He claimed he purchased it following a trial separation from his partner (which was recommended by their counselling sessions).  However, the flat had a relatively short time remaining on its lease which made it difficult to sell.  Mr Oliver asked the vendor to begin the process to extend the lease before exchange of contracts; otherwise he would have had to wait two years before he could make the application following completion.

The extension of the lease resulted in a substantial increase to the flat’s value, and HMRC argued that Private Residence Relief (PRR) should not apply, on the basis that he had been ‘engaging in adventure in the nature of a trade’.  The rules state at TCGA 1992, Section 224(3) that PRR should not apply where a property is acquired with “the purposes of realising a gain from the disposal of it”.

Interestingly, the Tribunal agreed that Mr Oliverʼs actions did not amount to a venture in the nature of a trade and that he did not have an intention to sell the flat when he first acquired it.  However, they instead considered whether the taxpayer’s presence in the flat was sufficient for it to qualify as his main residence.  They found that there were inconsistencies in his evidence and ultimately concluded that the quality of occupation lacked any degree of permanence or expectation of continuity.

Mr Oliver’s appeal was therefore dismissed.  Had Mr Oliver made a more convincing witness, and perhaps been able to demonstrate his intent to reside in the property more permanently he may have succeeded.  In cases such as this, taking advice in advance would help to avoid problems arising later.  We would be delighted to hear from you if you or your clients might be caught by these rules.

Open letter to ICAEW President – Subscriptions and Tax

Subject: Subscriptions and Tax

To the ICAEW President,

Imagine a world in which the Government suggested that a lawyer should be fined if their barrister lost a case. What would be the reaction of the Law Society?

Now, we have a Government proposal for something similar for the accountancy profession. It says (see 5 December – Sanctions and Tax Deterrents) that Government policy is to reduce the size of the tax advice ‘industry’, by threatening fines on ICAEW Members, even where they were acting legally and honestly, with a side effect of deliberately adding mayhem to Professional Indemnity Insurance quotes.

I fear this would affect all members in practice. Some may say, “I do not advise on tax avoidance,” but the trouble is that tax avoidance is not properly defined in the proposed legislation. The scope is wide, with the Government proposing that the State should have the power to fine professionals for ‘enabling advice to be given’ [not just advising] on what amounts to any commercial transaction which involves tax. Advisors would not necessarily know for some years whether their conduct was “incorrect”, because it would apply if the State subsequently won relevant litigation. Then, suddenly, advice given in good faith may become a punishable offence. Work out the justice in that.

Why should ICAEW Members, taught to act ethically and responsibly, be fined and punished, for example, for simply referring a client to advice from a QC?

This brings us to a key question. Are the ICAEW going to protect members from penalties, which are unjust? I feel the initial response from the ICAEW is disappointing. Yes, the new HMRC document is better than the original consultative work, but they are still far too broad and wrong in principle. HMRC admit this particular policy is not targeted at the true purveyors of ‘tax avoidance’, but to impose sanctions on “enablers”. Why should bystanders be punished, because HMRC find it difficult to administer the tax system?

The Institute document also notes that HMRC has announced that they “Do not expect that members acting ‘wholly within the spirit’ of the standards contained within the recently-updated Professional Conduct in Relation to Taxation” would normally be affected by the enabler provisions. Well super! So you can hope [not guarantee, note] you may not get punished, if you act under Ethical Guidelines. I would hope that all Members would act under ethical guidelines. However, if I acted under such guidelines to give independent advice, I would “hope” that I would be backed by ICAEW in saying I had acted in a proper professional manner. I would not expect it to be second guessed by some State Official most likely without similar professional training to determine if they agreed I was in the “spirit” of such guidelines.

I totally agree HMRC should be properly resourced to review the system they have to work with, with an efficient, trained and motivated staff, but then it must have a parallel, independent appeals system. It is the way of Dictators to “improve” an appeals system by persecuting appellants and their advisors. It should not be a route a UK Government aspires to, however “efficient” it seems to have no-one disagree with the State. Maybe the policy is designed to help in “Making Tax Digital”? If “enablers” of independent advice have been eliminated and if incorrectly arguing with an official means a fine, then surely 99.9% of the population will agree their tax assessment is correct, probably even if the Government computer “proves” it was 117.5% of them.

I worked hard to get my qualifications as an FCA. It has been something I have been proud of. Thanks to Government propaganda, it now feels like I am one step down from a shoplifter.

I believe such propaganda is lazy, because it suggests the problems in the tax system are down to ‘Accountants – and other such slimy creatures’. I could suggest other causes? HMRC staff and administrative cuts, poor policy co-ordination, vast systems and culture changes at HMRC which do not seem to have worked? Perhaps even a level of competence at Government level which drafts a referendum bill which then needs to go to the Supreme Court to determine whether Parliament meant “Yes or No”, or were only joshing? The Institute should point this out to the Press, rather than kow-towing to Press oversimplification because accountants seem ‘easy meat’.

ICAEW, please stand up for your Members. You want our subs. You should protect all of us, even if that means telling the Government they are wrong.

Manuel alive and well and working in Whitehall – Tax Avoidance Deterrents

After the recent tragic death of Andrew Sachs, there are rumours that his spirit for competence lives on in our legislation.


An open question for the above.  How do the current proposals (published on 5 December 2016 as Sanctions and Deterrents) fit with The Rule of Law?

I believe in the vital importance of the Rule of Law.

I believe it can only work with;

a) Clarity

b) Independent Judgement

c) Consent

Naively; having been trained as an Inspector of Taxes, I believe that the intention of Parliament was as set out in the words they enacted.  There is a lot of case law which supports this.

With 17,000+ pages of legislation the situation is complex.  There may be a dispute as to interpretation.  That arises, almost certainly, through lack of clarity (see (a) above).  The disputing parties are then dependent upon ‘independent judgement’ which hopefully they can both trust – effectively the Rule of Law (cf Tom Bingham).

If they do not trust the independent judgement then (c) Consent is lost.  That is dangerous.

Probably with good intentions (I am told they pave the Road to Hell) HMRC are saying that certain professionals need their behaviour modifying.  To quote the ‘Strengthening Tax Avoidance Sanctions and Deterrents in their paragraph 5.4:-

The government noted the views and responses provided. It recognises that the avoidance market is not static but is constantly evolving. HMRC will further develop the options set out in Chapter 5 of the discussion document to supplement the important work undertaken in this area to date, whilst looking at new and emerging threats in the avoidance market. Alongside this, HMRC will continue to explore ways to further discourage tax avoidance by:

  • working collaboratively with businesses, individuals, industry and representative bodies to identify opportunities to further shrink the avoidance market
  • exploring how behavioural change techniques can positively affect decisions and choices for enablers and users
  • tailoring communications and engagement with users to support them to make the right choices and decisions including outlining the risks and consequences of entering into these kinds of arrangements
  • meeting the challenges and opportunities that current and proposed legislation, HMRC’s Making Tax Digital Programme and other cross-sector initiatives may present

In paragraph 5.5 they go on to say:

The government will continue to take decisive and necessary steps to ensure that those who seek an unfair tax advantage, or provide services that enable it, should bear the real risks and consequences for their actions.

So that is clear now?

Quite apart from their appalling grammar, and resulting lack of clarity, the proposed result of this appears to be:

i) An advisor may introduce a client to (say) a Queens Counsel who suggests a course of action he believes to be legal.

ii) Sometime – [likelihood, at least 10 years from final date of action bearing in mind current complex litigation process] – advice and action may be proven correct.  End of story.

iii) Alternatively, in the litigation lottery of the Courts (talk to lawyers!) the advice may prove to be incorrect.  In this case penalties would be sought against the person who introduced the QC, in all good faith!  Is asking for professional advice to be subject to a penalty?

iv) The proposed legislation encompasses virtually all commercial arrangements, not just ‘artificial’ ones.  ‘Tax Avoidance’ is not properly defined.  It rests on ‘losing’ under untested legislation.  There is no safe harbour.

v) The level of penalties (see time line) may be after the advisor retired.  If the professional involved advised clients wealthier than him, which I am sure the majority do, then they could result in severe financial embarrassment, perhaps even bankruptcy, of said pensioner.

The tone of the HMRC document of 5 December 2005 suggests that would be [perhaps in Chairman Mao’s words?] a good behavioural adjustment.

vi) Maybe?  In contrast, if the advisor had introduced his client say to a robber or a drug dealer, rather than a (presumably respectable) Queens Counsel, then these sanctions would not apply.  In considering this, what is ‘the Clear Intention of Parliament’ to quote a phrase.

I would be grateful if any of the parties to whom this is addressed could explain to me how it fits in with the idea of any penalty fitting in with the criteria proposed in HMRC’s 2015 penalties discussion document:

  • The penalty regime should be designed from the customer perspective, primarily to encourage compliance and prevent non-compliance.  Penalties are not to be applied with the objective of raising revenues.
  • Penalties should be proportionate to the failure and may take into account past behaviour.
  • Penalties must be applied fairly, ensuring that compliant customers are (and are seen to be) in a better position than the non-compliant.
  • Penalties must provide a credible threat.  If there is a penalty, we must have the operational capability and capacity to raise it accurately, and if we raise it, we must be able to collect it in a cost-efficient manner.
  • Customers should see a consistent and standardised approach.  Variations will be those necessary to take into account customer behaviours and particular taxes.

From an initial review, the proposed penalties fail all counts.  Specifically, they do not seem

1)     Fair

2)     Proportionate, nor even remotely consistent.

They are potentially an invite for state bullying.

An easy way around the problem is the one which worked for many years historically.  It was for independent, disinterested advice with proper, well-resourced HMRC review.  In such a case ‘reasonable care’ all round could be provided by someone, properly qualified, who was not rewarded as to outcome and gave independent advice as to the law, with subsequent full disclosure of any relevant arrangements.

Corporation Tax and VAT Loans

Whilst as tax advisors we tend to focus on [what we think are] interesting technical tax issues and considering how much should be payable having calculated that answer. Another possible difficulty with tax is the practical one of cash flows and actually paying it!

You may or may not be aware that it may be possible to obtain a loan to spread the cost of Corporation Tax or VAT bills to free up working capital. For example, with a Corporation Tax loan you could spread the cost over a 12 month period rather than paying all in one go.

We are not able to advise directly on such funding, but if you are interested in such opportunities for your clients, please contact Jonathan Smith at JGS Finance (http://www.jgsfinance.co.uk/) on 07778 523 499 and he will be happy to assist.  Please use reference EVL when you make contact with Jonathan.

Jonathan Smith (Head of JGS Finance) is a Chartered Accountant who I know and have trusted over many years of working with him.

Paul Eaves

HMRC Fail in Toothless Attack

HMRC use Eric Morecombe tactics according to judge. “Playing all the notes but not necessarily in the right order”

HMRC use Eric Morecombe tactics according to judge.
“Playing all the notes but not necessarily in the right order”

Readers of our blogs will know we are always interested in cases analysing the extent of HMRC powers and how they should be used. The recent case of Raymond Tooth and the Commissioners for Her Majesty’s Revenue and Customs demonstrates (again) that HMRC powers are not infinite. It also brings out some highly topical points:

1) In Raymond Tooth the taxpayer filed a tax claim which HMRC later decided to challenge. They had though missed their normal time limit on raising an enquiry, so had to raise a ‘discovery assessment’.

2) The definition of a ‘discovery’ made by HMRC is confirmed to be very wide in scope and may include “a change of opinion or correction of an oversight” by the Inspector of Taxes raising the discovery assessment.

3) The general points in Cotter are good law and emphasise the requirements for good disclosure by taxpayers and a clear explanation of how they have computed their self-assessment.

4) The burden is on HMRC to demonstrate that their extended time limits for assessments under ‘discovery’ may be used only where they are saying that the loss of tax was brought about ‘deliberately’. Deliberately means intentionally or knowingly (Duckitt v Farrand).

5) All praise to John Brookes (Tribunal Judge in this case). He basically eviscerated the HMRC case. He said with regard to the issue of extended time limits,

“In my judgment this [assessment] cannot be right. The deliberate (or indeed careless) conduct necessary to enable the issue of a discovery assessment and extend the time limits for doing so must involve more than the completion of a tax return which, in itself, is a deliberate act. As a person completing a return must do so intentionally or knowingly, and can hardly do so accidentally, HMRC’s argument effectively eliminates any distinction between ‘careless’ and ‘deliberate’…[their] attempt to argue otherwise, saying that if the wrong figures were entered in the right boxes it might be careless but if the right figures were entered in the wrong boxes it would be deliberate, was somewhat reminiscent of, and about as convincing as, Eric Morecambe’s riposte to Andre Previn about “playing all the notes, but not necessarily in the right order.”

6) The case can also be linked to current concerns about ‘Making Tax Digital’ (MTD).

Evidence was presented about the problems created by a computer glitch on how the alleged loss claim should be shown. The computer system adopted was a respectable one, approved by HMRC. However, apparently it would not cope with the proposed claim. The advice given to the taxpayer – to fit in with electronic filing, was thus to use a computer ‘work around’. As most people with appreciate, this is quite a common suggested solution, because computer programming is never perfect. The work around meant the loss claim went in the ‘wrong’ data input box, but the taxpayer described this in the ‘white space’ on the Return and the final answer came to what he believed was the correct net tax liability. Despite this, HMRC when they wished to dispute the loss claim, accused him of ‘deliberately’ causing an underpayment of tax. Whilst HMRC lost in this case, it is easy to imagine the dangers of accidental non-compliance caused by seeking to meet tight computer deadlines for making tax digital. Then it appears from cases such as this that such computer errors may be seen as something more sinister by HMRC. I believe this emphasises the risks of making such a system compulsory, before it is thoroughly field tested and people are familiar with it.

I am pleased to see that most commentary from the profession seems to agree with this line.

There is an interesting contrast in the apparent view of HMRC on a balanced system, in that the proposals suggest taxpayers are to be given a compulsory deadline for compliance every three months, whereas if they get it wrong HMRC should be entitled to a time limit of 20 years to challenge it.

Compliance is a delicate flower, worth preserving. If the proposals are brought in, how many businesses will simply drop off the radar if they get behind for a couple of returns and then fear they have neither the time nor resources to catch up again?

Do people believe the MTD and new penalty proposals are fair? If not please lobby to try to get them amended. If computer filing is going to be so popular, as claimed by HMRC, there should be no need for compulsion. Penalties should be levied on people committing deliberate wrongdoing, not mere bystanders.

The Importance of Advanced Planning – VAT Registration

A recent case at the First-Tier Tribunal, DJ Butler v HMRC, highlighted again the benefits of taking professional advice in good time. The taxpayer operated as a sole-trader working as a decorator, project manager and carpenter.

In the absence of the project management turnover the taxpayer would have been below the VAT registration threshold. After HMRC identified that his turnover was above the limit, the taxpayer argued that the project management was run as a partnership with his wife; however he had always declared it on his individual self-assessment tax returns as sole trader turnover.

The Tribunal considered that the project management work should rightfully be considered an extension of his sole trader activities and that no partnership existed. It did not help that no profits were reported on his wife’s tax returns, and nor were there separate partnership bank accounts or sales invoices raised in its name. The taxpayer’s appeal was therefore dismissed.

It would appear that if the taxpayer had taken steps in advance to create a separate legal entity for the project management, whether a partnership or a company, and followed the correct reporting and legal steps, the planning may have been effective. As it was, it was difficult to argue that self-assessed sole-trader income was in fact from a partnership.

Taking professional advice in advance would have helped this taxpayer, is there anything we can help you with?

Open letter to John Pugh MP, House of Commons

UPDATE:  Please See Below for Response from Mr Pugh MP

Dear John,

We have met before some years ago to discuss tax and the financial situation generally.

I realise you are no longer in power, but I would draw your attention to two of the consultations released by HMRC over the Summer with the following comments:

Strengthening Tax Avoidance Sanctions [HMRC 17 August 2016]

1. I fear the proposals put forward by HMRC are disproportionate, ill-defined, with a gap of potentially years between the behaviour HMRC allege they have a problem with and ‘punishment’. Further the proposed punishment would not necessarily fall on the person who may benefit from the behaviour, which encompasses ‘any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable)’ but, it is proposed by HMRC, would be imposed on an independent advisor.

2. Tax rules are incredibly complicated. Surely it is not in the public interest to discourage a market for independent, professional advice?

3. The above definition would seem to encompass every commercial action, unless I am mistaken? Can you think of anything not caught in the proposed rules. Thus, under these proposals, every commercial action appears to be within the scope, if (probably many years later litigation finds they have been caught by a technicality). This means what amounts to an offence would only be determined ‘ex post facto’? Surely, wrong in principle, constitutionally. How can any responsible person act professionally and be sure they are compliant?

4. The proposal from HMRC is that an advisor would have a defence if they followed the opinion of HMRC(!) How is that ‘independent advice’? What about the occasions when HMRC are proven wrong by the Courts?

5. In addition to the proposed penalties being wrong in principle, the level suggested is such that an individual advisor could be made bankrupt and thus losing their professional membership and livelihood without actually performing nor even suggesting any action with illegal intent. Surely, this is disproportionate?

The HMRC consultative document actually says that it does not expect those devising what they see as ‘artificial schemes’ to be caught by the penalties. Apparently they ate typically companies based offshore. Is it fair to punish UK professionals when the authorities believe that the true problems lie elsewhere?


It seems to me to be a much simpler and more equitable system to be to allow a ‘reasonable defence’ for both taxpayers and advisors that they had received/given independent advice (with appropriate professional qualification/experience) without that advice being in any way compromised by being rewarded as to results.

If desired, this could be combined with professional rules to prohibit fees being linked to outcome. That way there would be no incentive to bias any advice towards ‘aggressive’ behaviour.

Making Tax Digital

This sounds as though it might be a good idea. Certainly, it has some sound points in terms of efficiency. However, there is an underlying principle of compulsion which is disturbing, especially when the computer systems referred to do not yet seem to exist, have not been fully tested, and seem to anticipate that all businesses will have to pay for them.


a) A big concern is the idea that businesses will have to file every 3 months in ‘real time’. The current requirement is that businesses have to file an annual return within 10 months of the year end. The new proposal represents an enormous extra burden, which in practice would fall particularly hard on small businesses many of whom are currently not even aware of the consultation.

b) As an accountant, I would generally encourage keeping good management accounts. This though should not be compulsory, nor be State monitored. The idea seems to come from someone with no empathy for the pressures on running a small business. No lack of work/sickness benefits for the owner, etc. etc. Compulsion on this scale would have to cover such items as:-

  1. Serious business disruption through unanticipated economic events
  2. Illness, death of a parent/spouse/child.
  3. Emotional/financial impact of divorce.
  4. Internal commercial problems, such as management disputes, employee problems, fraud etc.

These are serious issues which can hit everyone, and create further potential for subjective interpretation and ultimately undesirable court cases. HMRC suggest the 3 month filings may not be used for anything as this stage. If so, why impose an unnecessary burden?

There are a number of points of detail which need to be addressed, but fundamentally, with such huge powers on their side already I do not believe HMRC are short of powers. Giving arbitrary powers such as suggested would be counter-productive. Not everyone has access to/is comfortable with a computer, perhaps especially the elderly. Suggesting family help may seem good as a ‘sound-bite’, but then how much family tension/concern may it give rise to, particularly in cases where family finances are a sore subject?

I realise some of the points above are probably somewhat deliberately provocative. I believe the process though is important. Key issues as far as I am concerned is that the proposals are too vague to enable honest compliance and in addition risk stilting economic progress by imposing State burdens for no benefit and (according to the HMRC commentary on the 3 month reporting) to no required end.

I look forward to your considered reply.

Yours sincerely,

Paul Eaves

cc Consultation body

Response from John Pugh MP:

“Dear Paul,

Thank you for your email regarding the two recent consultations launched by HMRC.

The proposals on strengthening tax avoidance do seem broad and vague. It appears that the punishment for avoidance would fall not on the person who is benefitting from tax avoidance but on those who facilitate it. Moreover, the Government is not at all specific on what constitutes avoidance. I hope that the Government’s response to the consultation will define what constitutes facilitating tax avoidance more clearly in order to give firms such as yours better guidance on how the law will change.

On quarterly reporting, I have had a number of Southport businesses and accountancy firms contact me in recent weeks who are concerned about the increased administrative burden this will have on them. They are also worried about reporting their accounts incorrectly under this new system.

I accept that quarterly reporting may make it easier for HMRC to identify accounting errors, ensuring that businesses pay the taxes they owe. However, I do not think that the benefits it provides are enough to justify the extra administrative burden it places on companies, independent of the requirement to keep records digitally. It seems to run against the Government’s stated aim of “putting people and profit, not paperwork, first”.

The Government must ensure that companies pay the tax they owe, but their approach must recognise two things. First, it must minimise the additional burden placed on businesses. Second, the enforcement of new regulations should not be a cash cow for HMRC.

Because of the large number of companies who have contacted me on this issue, I will be raising my concerns with the Minister in the next few weeks, and I will let you know what response I receive.

Many thanks and best wishes,


Thank you for your response.