HMRC criticised for expanding ‘unused’ power base

FURTHER POWERS are being sought by HMRC, despite ‘failing’ to use those it already has, such as Conduct Notices, said RPC.

Conduct Notices are a powerful weapon for HMRC to use against ‘high risk’ promoters involved in tax avoidance, said RPC. It can be issued to promoters and then impose conditions that they must comply with.

The Conduct Notices have been ‘virtually’ unused since 2014, as there have been fewer than five issued and further HMRC powers have been deemed ‘unnecessary’.

Adam Craggs, partner and head of RPC’s tax disputes team, said: “A Conduct Notice is very serious as it can lead to substantial penalties. The fact that HMRC has used them on less than five occasions in two years suggests that there was no real need for them.”

HMRC may implement a fixed penalty of between £5,000 and £1m for a failure to comply with the conditions. There is no right of appeal and the validity can only be challenged by way of judicial review.

Adviser penalties

This comes as HMRC is set to gain further powers to sanction tax professionals, including accountants, lawyers and financial advisers. A consultation published on 17 August proposed penalties of up to 100% of tax avoided for individuals and companies who ‘enable’ tax avoidance arrangements.

Craggs added: “Parliament should first consider very carefully whether new powers are actually needed and ask HMRC to explain why, in recent years, current powers have not been utilised.”

The increased pressure to use these powers may lead to ‘inconsistent’ enforcement decisions by HMRC officers. RPC added.