New powers for the tax office

The 2014 Finance Bill received Royal Assent on 17 July 2014, which means it is now law.

Part 4 of the bill introduced “follower notices” and “accelerated payments”. These basically mean that the tax office can now force you to change your tax return and pay tax in advance of concluding a tax investigation. And, they are looking to extend their powers to be able take money out of your bank account!

The problem the tax office faced was that there are a large number of very similar tax schemes and it is more efficient for the tax office to investigate a ‘test case’.

If the tax office wins the case, unpaid tax is recovered from the taxpayer but there has been little incentive for those using the same or essentially similar arrangements, to accept the court’s findings and pay to any underpaid tax.

“Follower Notices” and “Accelerated Payments” make it much harder for people to participate in a tax scheme because they have to pay the tax in question and professional fees for the scheme upfront. And, it may take many years for the test case to be settled.

The legislation is very strong. There is no right of appeal, just a 90-day window to object. If your objection is unsuccessful you have 30-days to comply.

And, there is a maximum penalty of 50% of the tax due, if you fail to comply. The only saving grace is that this can be reduced if you co-operate and you do have the right of appeal against a follower notice penalty.

There a reported 65,000 tax cases outstanding at the moment. If you are caught up in any form of tax investigation or dispute we can help, even if it is representing you in the negotiations.

Whilst advanced tax planning has been very high profile in the general media, some commentators are of the opinion that the tax office is a “spin machine” portraying the impression that they always wins in Court.

The recent Rangers FC appeal which was won convincingly by the taxpayer is an interesting case. The judge was highly critical of the tax office’s “disengenious” approach and unsurprisingly, they have made almost no public comment.

It could be argued that the legislation is retrospective and a breach of human rights. There has been universal condemnation of the proposal to have the ability to take funds directly from taxpayers bank accounts. One wonders what the future will be.