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This week we report two cases (S McCumiskey (TC8459) and J Huntly (TC8466)) involving fraudulent enterprise investment scheme (EIS) claims made by a firm which claimed to be acting on behalf of taxpayers, but which appears to have stolen the repayment made by HMRC. The police are involved and it would not be right to make further comment on their conduct here.
But it is worth reflecting on HMRC’s role. HMRC had not initially reviewed the returns but had made repayments under the ‘process now check later’ principle. It was only later, when the returns were examined, that it realised something must be wrong. It was highly improbable that taxpayers on low incomes would have made such large EIS investments. At the very least enquiries needed to be made. Judge Gething was not impressed – going as far as to say that the agent’s false repayment claim was facilitated by HMRC’s policy.
There is a real dilemma here for HMRC. We all want repayments due to our clients to be made as soon as possible and do not want them held up unnecessarily. At the same time we all have an interest in ensuring that false claims are identified before money is paid out. There is a balance to be struck and I am not sure that it is currently in the right place. This is something which needs open discussion between HMRC and taxpayer representatives, because any solution will have to involve compromise. But surely no taxpayer should have to repay tax to HMRC when they have been the clear victim of fraud and never received the original rebate.
If you do one thing...
Read the latest opinion of the general anti-abuse rule panel (tinyurl.com/gaarpanelfeb22). Although the opinion was ultimately unfavourable to the taxpayer, the position seems less black and white than most of the previous opinions.
