Freelancers trade body PCG says it is deeply concerned over a strategy by tax inspectors to clamp down on people before they break the law, following on from the retrospective clawing back of tax from a number of MP’ expenses.  

A Daily Telegraph article states that a “new code of practice” for tax inspectors, issued last month, contains a key passage on defining tax avoidance:

“Avoidance is not defined in the Taxation Acts. One definition is “a situation where less tax is paid than Parliament intended, or more tax would have been paid, if Parliament turned its mind to the specific issue in question”.  At a practical level the problem is then essentially one of deciding what Parliament would have intended and identifying who should be asked to decide this.

Chris Bryce, chairman of PCG, says: “Clearly, if this is a new departure for HMRC we are very concerned. HMRC must act within the law of the land.  Our legal advice is that if HMRC ever did take anything to court on these grounds it would be thrown out and fined heavily.

“The suggestion that tax inspectors should pursue people who have arranged their financial affairs in perfectly legal ways based on a retrospective analysis of Parliament’s collective thinking is outrageous.  Minimising one’s tax bill is a perfectly legal and proper course of action.  These new guidelines, if true, strike one as Orwellian in the extreme.”

PCG says it is seeking urgent clarification of this issue from financial secretary to the treasury Stephen Timms MP.