Revenue and courts usher in rear-door revolution
09/05/2007

Tax planning schemes used by companies to reduce their bills are being systemically quashed by the government, it is feared.

Former tax inspector David Teale believes ministers, backed by judges have ushered in a rear-door revolution, to turn the screws on hard-pressed businesses and individuals.

Teale, a director at UK top-30 accountancy and advisory firm DTE, is calling for a debate on government and judicial policy on tax planning.

"The government has introduced crucial new concepts. Ignoring the principle that tax planning techniques are either lawful or unlawful, the government now categorises certain types of tax planning as lawful, but 'unacceptable'," says Teale.

"Additionally, the government now has powers to make retrospective tax legislation in certain cases - a major change to the way the county is run, which has passed almost without comment."

Teale goes on: "That any government should attack tax avoidance arrangements is nothing new, but it is the way that this has been achieved that has some worrying implications. Powers to seize documents and raid premises are being used more widely and will be strengthened, and the Revenue is increasingly willing to disrupt the personal and business life of individuals involved in planning schemes that is does not approve of.

"The view of the Revenue, encouraged by ministers, is that those who indulge in what it considers to be 'unacceptable' tax planning are fair game, and the full resources of the state should be turned against them."

At the corporate level, Teale fears the Revenue's new aggressive approach has driven many international companies to base their headquarters outside the UK.

The attitude of judges has also undergone radical changes, with judges interpreting, rather than simply ruling on tax legislation - with interpretations usually in favour of the Revenue.

"In general, today's judges seem to be inherently antagonistic to any proposals that may lead to an individual or company paying less than their 'fair share'. Accordingly, the Appeal Court and the House of Lords have been enthusiastically looking for ways to strike down tax planning arrangements."

Teale adds: "There are, of course, few who have much sympathy for those who can afford to pay clever accountants and lawyers to reduce their tax bill. But ultimately, we come back to 'ends and means'. The means employed have included some pretty rough justice and the introduction of retrospective legislation. Who will end up in the government's sights next?"

Teale believes the UK's unwritten constitution has always depended upon the authorities 'playing the game'. "When the authorities are prepared to ride roughshod over conventions, there may be bad times ahead for all of us - not just the fat-cat tax avoiders," he says.

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