As many of you will have realised, I keep politics out of my on-line writing and social media. I am not going to start now. There has been much speculation about the supposed investigation into Mr Zahawi’s tax affairs and a “tax expert” has made assumptions about the amount of money, or should we say value, of assets apparently now deemed liable to tax, capital gains tax so we are told. I should also say that the “whistle blower” or source of the leak of some of the circumstances, whether an employee of HMRC or of a professional adviser, has committed a sackable offence in my book.
- With any taxpayer, we have to consider the level of the offence. Is it negligence or carelessness, ignorance or tax fraud or evasion? In my experience acting for taxpayers in trouble with HMRC over the latter fifteen years of my tax career it is rarely evasion, though it happens. Mostly it is ignorance or an oversight.
- An oversight is probably carelessness. What might be omitted from a proper declaration for tax purposes varies, but it would often be related to how much money the individual concerned is used to dealing with. So for the average person on an income of under six figures, we might be looking for an omission of a thousand or a few thousand but usually not more than that. For someone used to dealing with income and other assets in millions, what might be overlooked could be much larger. Carelessness: lack of attention and thought about what you are doing.
- Then of course if the individual subject to investigation has not actually received any income or gains in their pocket, so to speak, they might if they were busy and did not think too much about it, assume they could not be taxed on money they never had.
- If no money has been received because the assets transferred were seen as a gift by the individual concerned or from an entity controlled by that individual, the gift would be deemed as a disposal for capital gains purposes. Many would say that gifts where no money has changed hand should not be liable to tax but of course they have been for many years.
- Did the individual in question receive any money from a transfer of shares? Probably not.
- We can be sure that if there was an enquiry or investigation going on in July 2022 it had most certainly been in progress for months prior to then and quite likely a year or so. HMRC are notoriously slow in their correspondence, and of course professional advisers also need time to respond and consider their case and argue if they disagree.
I am not defending anyone, including Mr Zahawi. I just hope to explain that these matters are not straightforward.