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A reminiscence from 2042

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You won’t know my pal, George. George is in his eighties now. A good 20 years younger than me. He had a reasonably productive life having built up George’s Widgets and sold it for £600,000. He’s spent most of that £600,000 (well, some of it, because he gave a lot of it to charity) and is now living off his state pension and a £20,000 p.a. private pension, but his needs are modest and he owns his own house, so he’s enjoying his retirement.

Or at least he was until the letter came. It was from HMRC demanding that George pay them £3,426,296.80. George came to me in tears. I’ve never seen him cry before in all the years I’ve known him.

I started to read the letter. It said that back in 2024, George had bought plastic packaging from a company called Megapackaging plc. George could not immediately recognise the name, but it then came back to him. He explained that in 2024, before he switched to cardboard, he sold his widgets in plastic bags containing six widgets each. He vaguely remembered a salesman from Megapackaging offering him plastic bags at a price that undercut his then existing supplier. Always one for a bargain, George had given him a trial order, then another order and then began to use Megapackaging as a preferred supplier. However, they let him down badly in 2026, so he stopped buying from them.

Well, apparently, so HMRC says, Megapackaging went bust owing a large amount of plastic packaging tax (whatever that was, because of course plastics went out of use in the 2030s).

So what’s that got to do with George? HMRC is saying that it thinks George did not do adequate due diligence when it ordered its plastic envelopes from Megapackaging. George says he treated them like any other supplier. He gave them a small order as a test. They delivered a quality product and didn’t push to be paid quickly. He remembered that his purchase ledger clerk was very finicky and insisted on looking up Megapackaging at Companies House and looking at its website. They were a good supplier until they messed up a big order in 2026 and George dropped them.

I read on. HMRC is saying that it was not sufficient for George to satisfy himself about Megapackaging. He should have investigated the people they bought their plastics from. Apparently, one of them, Cheapco Ltd, was a crook – or at least that is HMRC’s view. I find it hard to believe that, even in the semi-primitive days of 2021, Parliament would have held George responsible for Megapackaging, a large public company, not having discovered that one of its suppliers was a crook (if indeed it was).

But all that was almost 20 years ago. That is ancient history. George cannot possibly be bankrupted now in his retirement because he did not think 20 years ago that he needed to investigate the supplies of Megapackaging plc.

Then I looked at the legislation. There it was in black and white: FA 2021 Sch 9 para 6(2) says ‘in a case involving a loss of tax brought about deliberately by R or P’ HMRC can give a secondary liability and assessment notice to R up to 20 years from the end of the accounting period for which R was liable to pay the tax.

I started to worry on George’s behalf. I worked out that R can be George if P is Megapackaging. So can George be R? Schedule 9 para 21 says that he is if he is acting in the course of a related business (which George was, as Sch 9 para 21(a) says that a business which is supplied with plastic packaging components produced by the registered person is a related business) and he knew or ought to have known that P had failed to pay plastic packaging tax which he was liable to pay. I began to relax. Surely P is Megapackaging. Sadly, no. P is any person who is liable to pay the tax.

So what HMRC is saying is that as George did not do sufficient due diligence on Cheapco Ltd, he is liable for the tax that Cheapco evaded.

Can that be right? I remember the Boston Tea Party slogan from 1773: ‘No taxation without representation!’ Surely that still held good in 2021? 630 odd MPs would not vote to impose a clearly unreasonable tax charge on George in 2042? Of course not! Or is that right? How many of them read the 400 plus pages of the Finance Bill before voting to pass it? Fortunately, the Wayback Machine still gives me internet access to 2021. I see that the Finance Bill was published on 11 March 2021 and was approved by the House of Commons on 24 May 2021. That is about 12 weeks. So how many of the MPs who voted to impose this tax charge that is going to bankrupt George knew what they were doing? I’d like to think all of them because I think that the spirit of 1773 lives on, but I suspect none of them because I am unbelievably naïve. I probably need to grow up and recognise that the meaning of democracy in 2021 had nothing to do with MPs doing what they thought to be in the best interests of their constituents such as George.

And where were the professions, such as the ICAEW and the CIOT? Did their members urge them to protest against this clear unfairness? I’m ashamed to say that I was one of them. I did not study the Finance Bill, so did not identify George’s plight until it was too late. I could say that I was in my 70s and reading the Finance Bill from cover to cover (which I did in my 30s) was then beyond me. But I cannot hide behind that. George’s plight arises because 17 years ago in 2021, I along with most of my professional colleagues, did not make the effort to care about him.