Experts question HMRC decision on Angela Rayner’s tax affairs
Tax experts have questioned HMRC’s decision not to fine Angela Rayner for failing to pay stamp duty on a flat she bought in Hove.
The former deputy prime minister agreed to pay £40,000 in unpaid tax on the property but did not receive a penalty from the taxman.
Rayner’s spokesman said that while HMRC’s investigation had decided that stamp duty was payable at the higher rate, it found that she acted with “reasonable care”.
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“HMRC concluded that she had not acted with any impropriety or carelessness and that accordingly no penalty is chargeable,” he said.
Rayner consulted two leading tax lawyers on her affairs and they reached two different conclusions. One advised her she would have a “realistic chance” of successfully appealing against HMRC’s decision but that it could take years. She accepted the decision and paid the tax.
Dan Neidle, a tax lawyer and founder of Tax Policy Associates, said a report by Sir Laurie Magnus, the prime minister’s ethics adviser, had concluded that Rayner was “careless” and he could not understand why HMRC had taken a different view.
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“The facts, as reported by the prime minister’s ethics adviser, were that she [Rayner] obtained advice from two sets of lawyers [on the purchase],” he told Times Radio.
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“Both of them suggested she sought tax advice and she didn’t take tax advice at the time. That’s why the mistake was made.
“I said at the time, I thought that was careless. Her statement says HMRC have concluded [it] isn’t careless and are not charging a penalty. And I can’t explain why that is.”
He later added: “Our team doesn’t understand the ‘not careless’ finding. We’ve spoken to other senior lawyers, including a retired judge, and we’re a bit mystified.
“It is hard to see how a taxpayer, undertaking a complex transaction involving a court ordered trust for a disabled child and the purchase of a second property, and twice told to obtain specialist tax advice, can be said to have taken reasonable care by not doing so.”
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Andrew Park, tax investigations partner at Price Bailey, said: “At the very least, it’s evident here that the original advisers involved in the preparation of the SDLT [stamp duty land tax] return were not provided with all relevant information by the taxpayer so it’s not at all clear why HMRC can conclude Ms Rayner took all reasonable care.”
Neidle added: “We are all — tax lawyers and everyone else — left wondering why HMRC concluded she wasn’t careless. People are going to keep asking questions until Ms Rayner is more open about what happened and why.”
Sean Randall, an independent stamp duty tax expert, said that he found it “extraordinary” that HMRC had not fined Rayner for failing to pay the right amount.
He said: “Penalties can be imposed in two scenarios. A deliberate error, which is akin to fraud, and a careless error, which is akin to negligence. It seemed to me that she was quite clearly careless. One conveyancing firm had warned she get specialist advice, and another firm had recommended it.
“They had some kind of intuition, correctly, that Rayner’s tax affairs might be more complicated by virtue of her circumstances and recommended or warned her to get tax advice.
“I think if you asked 100 people on the street, 99 would say she was careless by not heeding those warnings. But ultimately, it is HMRC who decides. I find it extraordinary she’s been found not to have acted carelessly.”
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HMRC is yet to comment on the decision but sources close to the deputy prime minister said her lawyers had argued that she had “a realistic chance of establishing that the stamp duty should have been payable at the standard rate”.
However, she decided to accept HMRC’s decision given the “inherent uncertainty of the legal position”.
Graham Aaronson KC, who represented Rayner, said new facts had emerged in the case which led HMRC to conclude that Rayner had taken reasonable care to ensure that she had paid the right amount of tax.
Magnus concluded that Rayner had been advised to take tax advice and had failed to do so. But Aaronson said this was on a different point of law that was irrelevant to the issue which led her to paying the wrong rate of tax.
“While Magnus was under pressure to conclude the case, he took a maximum of two days looking at the case while HMRC spent a minimum of two months,” he said.
“They carried out a textbook thorough investigation and needed to be satisfied on all the evidential points.
“They concluded that the error in Rayner’s return occurred even though she took ‘reasonable care’ and that is why she was not ordered to pay a penalty.”
On Monday, the day after Rayner published a 1,000-word essay challenging Starmer’s premiership, Aaronson sent a two-page legal letter requesting HMRC close the matter “as soon as possible”. He told officials that they had all the relevant information to shut down its inquiry without further penalties, it was reported.
Aaronson told The Daily Telegraph that HMRC responded on Tuesday, informing Rayner that the case was closed without further action.
Aaronson had hoped it would be resolved in late March but HMRC’s investigation took longer than he expected. He said that it was “no coincidence” that the matter had finally been settled this week.