The CLLS Responds to HMRC's Consultation on 'Closing in on Promoters of Marketed Tax Avoidance'

The CLLS Tax Law Committee's full response to the consultation can be viewed here. 

We want to flag the gravity of our concerns.  It is a long consultation paper asking no less than 62 questions and we have written a correspondingly long response.  In summary we agree with very little of what is proposed (other than that it is right to do something to tackle the promoters of mass-marketed avoidance schemes).

Whilst we go into detail on many different alternatives in our response we would like to make clear that we think HMRC and Treasury really need to go back to the drawing board with this set of proposals.  We are not just talking about unnecessary costs, burdens and jeopardy for honest taxpayers resulting from the actions of a small number of bad actors.  We are talking about proposals which breach established fundamental human rights, the rule of law and constitutional conventions.  In particular:

• HMRC enforce tax legislation, they do not make it.  The USN proposal is so broadly framed that it would effectively give HMRC the power to criminalise, by regulation, with no mechanism for Parliamentary scrutiny and very little scope for judicial oversight, any conduct that HMRC might consider to amount to tax avoidance.
• The proposals in relation to legal professional privilege are particularly concerning. Time and again, Parliament has recognised in legislation granting investigation powers that LPP is a fundamental right that is outside their scope. However, this consultation, uniquely in our view, amongst other things suggests a new concept of a limited waiver of privilege but in circumstances that are ill-defined, lack any definition of how such a waiver is supposed to work and fail to explain why other routes to achieving what HMRC seeks do not work. The whole approach to LPP in this consultation is one that CLLS finds seriously objectionable.
• DOTAS is not fit for purpose as part of the criminal law.  It is designed in completely the opposite way from criminal law, where the aim is to make the offence clear.  The tests are vague and subjective deliberately in order to create doubt and make the disclosure net as wide as possible.  The idea of proving beyond reasonable doubt that they have been met would in many cases be ludicrous.  Even before we get into proportionality and the fair limits on what should be a strict liability criminal offence, the whole concept of the proposal is neither fair nor just, nor even workable.  

The CLLS is at HMRC and Treasury’s disposal to develop the targeted weapon which wipes out these promoters (which have no overlap with CLLS members’ activities).  But we can’t condone these measures which are like mass deforestation to cure an aphid infestation – the collateral damage is completely disproportionate to the target.  It is also totally incompatible with the government’s growth agenda.