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Who could have predicted that the weekend papers would be dominated by discussion of the difference between careless and deliberate behaviour? The context is, of course, the continuing saga of the tax affairs of the former chancellor of the exchequer, Nadhim Zahawi. Taxation has no inside knowledge, but it does seem clear that Mr Zahawi paid several million pounds to HMRC in settlement of a tax liability relating to his shares in You Gov and that this included a penalty based on careless behaviour.
The episode is fascinating for tax professionals, but what particularly interests me is the public reaction to this behaviour being accepted as careless. How, people ask, could somebody have been careless over a tax bill in running into millions? The money can hardly have dropped down the back of the sofa accidentally. Because the amount is large, people assume the failure to declare it must have been deliberate.
Investigation specialists know that things are more nuanced than this and that there is not necessarily a connection between the amount of underpaid tax and the penalty categorisation. But that is hard to explain and I fear that this saga might lead to a lack of public confidence in the fairness of the tax system. If, the argument goes, somebody who puts a few quid in their back pocket gets a higher penalty than a cabinet minister who under-declares millions in taxes, then there is one rule for the rich and another for the poor.
I don’t believe this is true but I can see why people might think it. The repercussions of this tale, however it is resolved, could be long-lasting and damaging.
If you do one thing...
See HMRC’s updated guidance on the transfer of assets abroad legislation (tinyurl.com/hmrcintm600000).
