Saturday 9 November 2013

Saturday, November 09, 2013 Posted by Jake No comments Labels: , , ,
Posted by Jake on Saturday, November 09, 2013 with No comments | Labels: , , ,

In November 2013 the Home Office launched a GREAT Club. Yes, the capitals in GREAT and C are appropriate - the name of the club is "GREAT Club", as you will see from the Home Office press release below. Clearly the Home Office has access to some really great minds to think up a great name like that. Or have they mispelled GREET, as in greeting visitors to the UK? Or perhaps GREED, as in greedy (see hypothesis below)?.

Anyway, the birth of the GREAT Club was proclaimed in a Home Office press release is:

"the launch of the GREAT Club, an invitation only service providing top business executives with bespoke support from UK Visas and Immigration (UKVI). The Club will start in the New Year as a 12 month pilot aimed at around 100 global business leaders who use the visa service and have strong links to the UK. They will be provided with an account manager to ensure their journey through the visa and immigration service is swift and smooth. The account manager will also be able to arrange visa services tailored to each individual’s needs at no extra cost during the pilot."

Now I suppose the immigration process can be frustrating. But you can be pretty sure that the 100 "top business executives" invited to join the GREAT Club will be well served by their own Personal Assistants, and their Personal Assistants' Personal Assistants (when you get to be PA to a truly top executive you don't have to make your own coffee) to lap up all the tedium and frustration of the visa application process. The Home Secretary won't be finding prospective members to invite into her exclusive GREAT Club sitting on their suitcases in Heathrow.

The reason top business executives shift their businesses to the UK has little to do with how easily they themselves can pass through immigration. It is not to avoid the inconvenience of getting a stamp in their own passports that they hesitate from relocating. However, there are other things they may be more keen on avoiding that may lure them to our shores.

And here we are persuaded to show some sympathy for tax accountants. This is not without precedent - Ripped-off Britons has already been nice to estate agents and to bankers. Now we consider the plight of the tax accountant.

The poor things are getting beaten up by MPs for helping their clients through dodgy-but-legal loopholes. And then they are getting beaten up and severly fined by a High Court Judge for not helping their clients through dodgy-but-legal-at-the-time loopholes.

First, here's the sort of beating they get from MPs from a session of the Public Accounts Committee (PAC) of the UK Parliament looking into tax avoidance schemes. In this session MPs questioned Aidan James, a director of a tax consultancy advising those who want to avoid tax:

Q103 Ian Swales: How many of the schemes you have marketed are now illegal?

Aiden James: Most of them.

Ian Swales: Most of them?

Aiden James: All of them, I suspect.

Q104 Ian Swales: All the schemes you have marketed are now illegal, so you are now looking for the next loophole-is that a fair description of your business?

Aiden James: That is how it works, yes.

Q110 Stephen Barclay: The model, if I am understanding correctly, Mr James, is that most of the schemes that you introduce get closed down within a relatively short period of time.

Aiden James: Yes.

Q111 Stephen Barclay: So then you aggressively target a client base and get as many as you can through in a short period of time on the basis that HMRC cannot pass retrospective legislation. Therefore, your clients will get a tax window where they can reduce their tax until HMRC wake up and close that scheme down, by which time you have moved the game on to the next scheme. Is that a fair summation?

Aiden James: I would agree with all that you said apart from "aggressively market". 

Then, having been hounded thus by the legislators from Parliament, a member of the tax planning fraternity was penalised by the High Court for not helping his client through dodgy-but-legal-at-the-time loopholes. In this case the judge condemned a tax accountant who "erred by failing to advise the Claimant to take the advice of a non-dom specialist".

The High Court judgement, made in June 2013, related to the following:
In October 2004 the condemned accountant in this case had failed to advise his client to consult a tax expert specialising in devious "non-domicile" loopholes. The loophole in question was the Bearer Warrant Scheme (BWS). Available only to non-doms (such as members of the GREAT Club), this scheme involves exchanging shares for bearer warrants, sending the warrants overseas, and selling them there where a non-dom would not be liable for Capital Gains Tax. A clearer description is available in this article by Mike Ward. This "Bearer Warrant Scheme" was blocked by a change in the law in March 2005. Had the accountant referred the client to the non-dom specialist in October 2004, the client would have been able to slip through the loophole before March 2005 when it was made illegal. Instead, the client tried another avoidance scheme - a Capital Redemption Plan sold by the tax planners Montpellier - which was later declared invalid.

For this transgression the Court imposed the following penalties, being monies the accountant would have to pay his client:

        a. £763,658.00 in respect of CGT that he has had to pay after giving credit for the sums that he would have had to pay if he had embarked on BWP [the other tax avoidance scheme that was legal at the time];

        b. The outstanding balance of the cost of entry to the Montpelier scheme of £180,000;

        c. A sum in respect of interest charged by HMRC including the cost of borrowing money to buy tax certificates; and

        d. Interest where appropriate.

Perhaps this judgement will one day be overturned on appeal (it hadn't been at the time of writing this post, but please let us know if it is). But at least it shows willing!

Tax avoidance is possible because of loopholes in the law. The Office of Tax Simplification identified over 1,000 'exemptions' that have been explicitly placed in UK tax law, and form the backbone of the multi-billion pound avoidance industry. Perhaps the Home Office's GREAT Club will have this list of exemptions as part of their WELCOME Pack?

Tax advisors are berated by lawmakers (i.e. our MPs)  because they help their clients slip through these loopholes put in the law by our MPs. If the tax advisor fails to help clients through the loopholes, then the Law lands on them like a ton of bricks.

In the words of Mr.Bumble, tax law is an ass. A very deliberately designed ass.


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