More than half of Britons oppose retrospective tax legislation

More than half of Britons oppose the use of retrospective legislation to shut down legal tax avoidance schemes and make those who used them pay back the difference, despite their actions being within the law at the time. Seven in ten oppose plans to give HMRC the power to take money directly from people’s bank accounts over tax disputes, according to the results of a new ComRes poll commissioned by the political communications agency and tax lobbying specialist The Whitehouse Consultancy.

The poll revealed that 70 per cent of British people are opposed to the proposals contained in this year’s Finance Bill which will allow HMRC to clear a backlog of tax cases by retrospectively changing how enquiries are dealt with and demanding immediate and upfront payment of disputed tax through Accelerated Payment Notices, with individuals being required to take HMRC to court if they wish to challenge the decision.

The poll also found that 55 per cent of Britons oppose the use of retrospective legislation to shut down tax avoidance schemes with retrospective effect. Well known examples of the use of retrospective legislation include Section 58 of the Finance Act 2008, which closed down a tax avoidance scheme that made use of Double Taxation Agreements. As a result of Section 58, around 3,000 individuals are now facing demands for back tax and interest going back over ten years despite their arrangements being entirely legal at the time they were used.

The findings were determined as part of series of questions to establish the public’s acceptance of retrospective legislation.

Carl Thomson, Director at the Whitehouse Consultancy, said:

“While there is the temptation amongst politicians to see robust and draconian measures as in keeping with the public mood around tax avoidance, these results show that there is significant concern about the use of retrospective legislation to settle tax disputes and strong opposition to the idea of punishing people for behaviour that was entirely legal at the time it was carried out. Tax planning consultancies do, however, need to make sure they are communicating with HMRC effectively, as the public is marginally more inclined to support action if is applied to what it clearly tax avoidance rather than responsible planning.

There is clearly a lack of public sympathy for any suggestion that HMRC can abolish tax planning schemes and then expect money back from individuals who entered into those schemes when they were legal, as has now happened in a number of instances. The Treasury Select Committee has warned that the increasing use of retrospective legislation in tax affairs is damaging legal certainty and the attractiveness of the UK as a place to invest. These poll results should give HMRC pause for thought and suggest that the public is not willing to support measures that undermine the rule of law and principle of ‘innocent until proven guilty’ in the fight against tax avoidance.”