Mountain of tax owed would help Treasury
No one can avoid death or taxes – and the latter is about to be applied to even more assets, writes Ian L Handford
TAX Avoidance Schemes have been around a long time and during the 1970s-1990s the Inland Revenue inspectors even adopted a new name for targeting potential fraud schemes. All business proprietors were aware Tax Evasion was illegal, whereas Tax Avoidance schemes (created by experts) were used by those wealthy enough to take a risk and potentially save tax. Billionaires used them to make substantial tax savings on income, assets or death which always seemed odd to me, after all they were unlikely to be able to spend any extra £millions in their lifetime bearing in mind their existing huge wealth.
Having seen the first British “Tax Day” in history (March 23rd) now pass, it seems consultations about future taxes are already underway at HM Treasury, to help the Chancellor recoup an estimated £300 billion he has overspent due to the ramifications of Covid19 during the past year. The idea of prioritising second home owners and the self employed (higher IR35 fines) as being some of the worst tax avoiders seems odd, although not surprising, because Officialdom will see them as an easy target. Currently, there are 60,000 second home owners claiming they are a business which means they pay no Council Tax and if claiming Small Business Rate relief, are exempt from Business Rates as well. A second home operating as a business should generate income as a holiday let etc, but where no income or low income is recorded (as will be the case during the pandemic) they also pay no Income Tax. This is the loophole Treasury wish to plug. However, where a second home owner actually pays Council Tax, currently this will often be at a higher rate than locals pay and yet they use every local service available, while non-residents use few local facilities. Now how unfair is that.
During the 1970s-2000 small businesses were my specific area of interest for the lobbyist organisation, the Federation of Small Businesses (FSB). In that era the Inland Revenue and VAT Officials targeted this sector of business, operating what they called the “One in Eight tax indepth investigations”. Many of us in the FSB assisted thousands of self employed entrepreneurs and company directors, who often settled estimated tax or VAT claims rather than going to appeal. They knew the cost in terms of time and accountants fees would be massive. It was the FSB who invented the concept of “no win – no fee” type work and even an insurance scheme – still operating today. The IR35 tax legislation is yet another example of hounding entrepreneurs and though the Chancellor was reluctant to extend benefits to this sector during lockdown, he now admits he wants to increase taxes on the self-employed and entrepreneurs.
Four decades ago a publication ‘Inspector at the Door’, was issued by the National Federation of Self Employed and Small Businesses Ltd (today FSB) in partnership with the Adam Smith Institute – an independent, non-profit-making educational foundation operating in London and America. The book exposed how many Inspectors could demand rights of entry to business, what their powers were and how they justified intrusion of privacy where tax fraud was suspected. The publication proved an instant success, highlighting for the first time in history that there are 252 Inspectorates with powers of Entry, Search and Seizure against businesses and 30 Inspectorates who have rights of entry to private homes.
The mind-blowing statistics still apply and yet with the arrival of Covid no officials (from any Inspectorate) have done any site visits for a year.
Treasury may now wish to recoup an estimated £31billion of unpaid tax (owed – not collected) and will initially target second home owners and the self employed. Apparently they are not suggesting any form of ‘windfall taxes’ on rich traders earning huge profits.
Unlike America, we are not to follow what the International Monetary Fund (IMF) said in its Fiscal Monitor publication this month when suggesting “Governments should tax the wealthy to help combat rising inequality by using progressive tax policies (eg; tax should rise according to income)”. With an estimated two thousand billionaires around the globe (the UK has fifty three), we also have two-and-a-half million multi-millionaires here in Britain. Maybe by adopting the IMF stance we would see Britain once again leading the world in how best to collect additional tax. Ian L Handford had seventeen years on FSB Policy Issues and was national Chairman between 1998 – 2001