Finance (No.2) Bill

Further written evidence submitted by WTT Consulting Ltd (FB22)

Finance (No 2) Bill

Submission by professional tax advisory firm WTT Consulting Ltd for the Public Bills Committee for Finance (No 2) Bill.

As invited by the Committee, we would like to present the following.

WTT Consulting Ltd

WTT Consulting Ltd is a young company (formed in Spring 2015) but which in its short history has gained a reputation for its honest, transparent and reasonable approach to the tax position of a core group of clients, namely contractors, specifically highly skilled IT contractors.

Supported by a combined total of 70 years of tax expertise, we have studied intensively the history, current position and likely future prospects of our clients in seeking to arrive at a fair and realistic position for them and HMRC.

Summary of our submission.

Re directed earnings

Paragraph 1 of Schedule 1 Finance (No 2) Bill, introduces the concept of "re-directed earnings".

The definition invites the reader back to proposed section 5A(a) which requires that a payment is made to a person other than the employee. The implication is that this phrase has been taken from the Supreme Court decision in Rangers (July 2017) and relates to payments made by an employer to another party but which are outside the disguised remuneration definitions.

In this situation, the Supreme Court was very clear. The fact that an employer makes a payment, not to the employee but to another party, does not exempt the employer from liability.

In the present case, the new clauses make it clear that such an arrangement falls into the definition contained in section 554A ITEPA 2003. This section, in turn, brings about an EMPLOYER liability, but one that can be transferred in certain circumstances to an employee.

Paragraph 13 of Schedule 1 also applies to the above. This paragraph claims to make the above law retrospective and to include all payments made before 6th April 2011. (Para 13 (c).

Why is HMRC permitted to include, by stealth, retrospective law?

Why is HMRC denying the decision of the Supreme Court and by dint of retrospection, making that decision (paid for by taxpayers), irrelevant?

Why is HMRC denying taxpayers natural justice in giving themselves the power to open years previously closed by earlier legislation?

Loan charge information

Para 10 of Schedule 1 deals with information to be supplied to HMRC in order to calculate the DR charge.

Sub para 6 of that paragraph is the first instance in this legislation where it is possible, for a person to agree "with an officer of Revenue and Customs" terms for the discharge of liability to income tax.

We submit that this is a meaningless and empty gesture.

Not only has HMRC proposed to change the law with this schedule and previous Finance Act legislation, retrospectively, but actual experience has demonstrated that HMRC is following a campaign of deliberately stalling on holding meetings of substance to actually consider an agreement.

It is our view that the Rangers case firmly points the finger of liability at the employer in all situations but HMRC is refusing to chase that source of income, perhaps because this exposes a lack of policy and action in the past?

We have been seeking a meeting with HMRC to discuss this issue for over 6 weeks. We have been offered a date at the end of January, after the effective date for discussing this legislation. We consider this to be unacceptable.

Why are HMRC including such relieving provisions when in reality there is no serious attempt to offer any such relief?

Para 10 also includes sections dealing with "penalties for failure to comply" – section 35F to Schedule 11 Finance (No 2) Act 2017. It is well known within HMRC that in many instances, those lenders who made loans in the past have since been liquidated or have moved loans to others and the loans have become untraceable. In some cases, loans are known to have been made by extant parties but the lenders are reluctant to cooperate in supplying information.

It is grossly unfair that a taxpayer who undertook a perfectly legal transaction, now sanctioned by the Supreme Court as resulting in an employer liability, should face additional penalties where the employer/lender is unable or unwilling to cooperate. This is potentially punishing an individual twice for a legal action.

At the very least, proposed section 35H ibid, which deals with a reasonable excuse needs to be expanded to include scenarios in which efforts have been made but have been rebuffed or ignored by the lenders to provide information. After all HMRC has had ample opportunity to investigate in real time the loans but signally failed to do so. Why then should a taxpayer be punished for an HMRC failure.

This note is supplemental to an earlier submission and we ask for it to be considered and put to question when HMRC are called to evidence.

January 2018


Prepared 11th January 2018