Prepare to be named and shamed, tax avoiders!

A spending watchdog has recommended that tax avoiders be 'named and shamed' as a means of discouraging people from using clever accounting to pay less tax.

by Michael Northcott
Last Updated: 19 Aug 2013

The House of Commons Public Accounts Committee (the PAC) claimed today that HMRC is losing out on around £5bn of revenue per year from tax avoiders, and that firms helping people to arrange the finances to avoid tax are ‘running rings’ around it.

In a report, the PAC said that the taxman was losing a constant ‘game of cat and mouse’, because of advantageous tax positions that people can take by exploiting the amount of time HMRC can take to finally shut down some loophole or other.

It recommended that a system whereby tax plans would have to be submitted to HMRC for prior approval, similar to the scheme already in place in Australia. 

Margaret Hodge, the Labour MP who chairs the PAC, said: ‘Promoters of ‘boutique’ tax avoidance schemes, like the one brought to our attention by the case of Jimmy Carr, are running rings around HMRC. 

‘They create schemes which exploit loopholes in legislation or abuse available tax reliefs such as those intended to encourage investment in British films, and then sign up as many clients as possible, knowing that it will take time for HMRC to change the law and shut the scheme down.’

Of course, last year it emerged that comedian Jimmy Carr had been part of a scheme based in the Channel Islands which did as Hodge describes, but when he was rumbled by The Times newspaper, he apologised to the public on Twitter before pulling out of the scheme altogether. 

However, the idea of naming and shaming is not popular in accounting circles (who’d of thought it?) Chas Roy-Chowdhury, the head of tax at the Association of Chartered Certified Accountants (ACCA) told the BBC: ‘Where do you draw the line? There isn’t a clear cliff edge between what you could say is acceptable tax planning and what is unacceptable tax avoidance.'

Still, what is essentially a ‘focus group’ (though the PAC would probably fiercely deny that) bellyaching about tax avoidance is unlikely to effect much change. Remember, many of the people trying to avoid tax will naturally vote Conservative…

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