Back in the early 2000s, HM Revenue & Customs came up with an idea to quickly gather in money that was owed to it. Around 2,000 banking and IT contractors had taken part in a scheme based on the Isle of Man which was effectively put in place to save them money on their income tax payments. HMRC saw this, deemed that it was a tax avoidance scheme, and sent out Accelerated Payment Notices to those involved.
The APNs were supposed to be a foolproof way to gather in the fines for tax avoidance and late payment (because everything that was owed had to be paid, and it was all going to be late) as quickly as possible. In some cases those who had used the Isle of Man ‘avoidance’ scheme had to sell their homes to pay their debts. Some even became bankrupt.
It all seems to make sense until we look a little closer at the APN. These notices were sent out as soon as the scheme was unearthed, but before a proper investigation could be done. This meant that people were being asked to pay money to the government that, if the scheme was found to be legal after all, they wouldn’t actually owe.
The dispute over the scheme is, over a decade later, still ongoing. In the meantime, those who used it have had to stump up tens of thousands of pounds – and when the courts finally rule, it could be that they actually owe nothing at all.
It’s really a case of jumping in with both feet and landing in a pile of trouble.
Recently, HMRC have admitted that the APNs were issued far too prematurely, and that not all the conditions of demanding money from those affected were met. This means that, even if the court case goes in HMRC’s favour, what they did was still wrong.
Therefore, HMRC are repaying the fines to hundreds of contractors. It comes too late for those who had to see assets and houses, too late for those who lost their businesses, livelihoods, marriages and more, but it is an admission, and an apology. It is something.
But is it enough?
What do you think? Should those in the scheme have been fined immediately, or should HMRC have waited until a court ruling was made?