The need for vigilance when it comes to tax
When I started working in taxation more than 40 years ago, one of the first things I learned was that there was “no equity in taxation” – either you were taxed by the statute or not.
Lord Clyde in 1929 (paraphrased) said “No man is under the smallest obligation, moral or other, to arrange his affairs as to enable HMRC to put the largest possible shovel in his stores”.
Despite all the recent furore about Panamanian companies, that is still the correct legal position, although there has been a significant element of “moral creep” over the last few years, blurring the line between tax avoidance (which is legal) and tax evasion (which is not).
The moral issue has come to the fore with certain high-profile companies entering into “private” arrangements about how much tax they are prepared to pay to HMRC on complicated arrangements for licensing of intellectual property.
In the UK, HMRC are getting more information supplied direct to them rather than waiting for taxpayers to disclose it. We are all having to be more open with HMRC even if we don’t have to publish our personal tax returns (yet!) like some politicians.
Employment income is notified month by month and banks will provide interest details followed by dividends and rentals from letting agents, leaving perhaps only the self-employed to provide their own information. Even they will by 2018 have to communicate their figures to HMRC on a quarterly basis.
With all this information coming directly to HMRC, will this mean that every taxpayer’s “Digital Tax Account” is accurate? Eventually, maybe, but many errors could arise so in the early days at least, taxpayers will need to watch for mistakes such as someone else’s bank interest appearing in their tax account (how many Mr Smiths are there in the UK?!).