- As I understand it the powers are only aimed at cases where the taxpayer is engaged in a tax avoidance scheme, many of which are contested and take some time to be determined, meanwhile the tax otherwise due may be at risk;
- If an assessment to tax is raised, as matters stand it is usually due to be paid before any appeal is concluded unless hardship is proven, and these are schemes where the taxpayer is seeking to avoid tax which, but for the scheme, would be due; and
- I am not aware of detail being already in the budget announcement about what would happen in the event of an insolvency, but if payment of tax is due because such a scheme fails and the taxpayer has not provided for the tax then, no doubt the pari passu issue can be covered in the forthcoming consultation. In the case of a company entering scheme without any contingency to provide for the tax should the scheme fail, the directors may also be personally liable in insolvency to compensate the creditors. In the ordinary course in insolvency, a payment taken by HMRC in this way would not be recoverable as a preference because HMRC had the power to take it - there is no desire to prefer - in the same way as any creditor taking enforcement proceedings pre-insolvency. What HMRC appear to be seeking to do in their new power is take tax which is due as assessed until the conclusion of a successful appeal (or hardship application). Direct access to the taxpayers’ funds is something an ordinary creditor has to seek by way of judgment and third party debt order, some lenders obtain by contract, and the government is seeking to obtain by legislation.
In insolvency, the IP could determine on advice whether the scheme would be upheld on appeal and contest the assessment to tax, (or as often happens - await the outcome of other test lead cases) so could still challenge the claim, as they often do and recoup the funds. A company rendered insolvent simply by virtue of paying tax - the avoidance of which relies on a scheme which may or may not fail - we should perhaps not wish to see trading at the expense of other taxpayers not using such schemes to avoid tax.
Frances Coulson (email@example.com)