THE PAC has now concluded its session with the heads of tax from PwC, Deloitte, KPMG and Ernst & Young with, I suspect, little change in the opinions from either side. Having watched the questioning, I was impressed by the heads of tax.
Unsurprisingly, they are bright, mentally alert people with a strong client service ethos and a desire to abide by the law. They were, I have to say, very well prepared and were robust in expressing their opinions and prepared to defend their tax practices.
I think the issue has been triggered by the fact that the government is short of funds and wants to increase the tax take. Its problem is that the length and complexity of UK law (to which it is contributing) means that there is a huge grey area of tax planning/avoidance that falls between sensible avoidance e.g. ISAs and evasion. However "morally repugnant" the planning in the middle ground may be, it is legal; firms have a duty to advise clients and directors have a duty to shareholders. In all of this, tax mitigation is a legitimate part of maximising returns.
HMRC has the right to challenge planning. It is advised on schemes and people using them have to notify; it can challenge on connected party transactions and will soon be able to use the General Anti-Abuse Provisions as well as the existing targeted anti-avoidance legislation.
Just a thought, but perhaps the government should invest a bit more in HMRC, rather than decrying the fact that accountants employ a lot of intelligent people. It could, of course, also seek to simplify the legislation so there is less room for debate. Neither seems likely to happen, so I am not sure where we go next.
I suspect that, in reality, each taxpayer will continue to decide where the boundaries are and act accordingly.
Cathy Corns is a corporate tax partner at Mercer & Hole
This article originally appeared on Mercer & Hole's blog
You are right to suggest that the government should invest more in HMRC which should in turn invest in experts from industry and the professions. When I was Director Anti-avoidance group we recruited several highly skilled (and expensive) tax advisers from the Big Four and industry. They were worth every penny in that they had the commercial knowledge and experience to identify transactions which were purely for tax and those which were done for commercial reasons. I dont think any of the people I recruited are there now and I dont think they have been replaced. Despite what people in Private Eye and the Guardian write, HMRC really does need external experts and should pay the market rate for the best people.
Posted by: Chris Tailby, 06 Feb 2013 | 15:36
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