Aggressive advisers use delaying tactics to hamper the taxman

Last summer a senior legal source involved in the group litigation orders ­
challenges to the UK tax system made through the European Courts ­ complained
about the strategy taken by
HM Revenue & Customs
as it defended itself against the tax challenges.

‘It has been a long slog and I was surprised at how long the government was
able to string cases out. Some of the results of the
European Court Justice
decisions were surprising because the government ran every argument, good or
bad, in its defence,’ the legal expert said.

It is with some irony then that at a
Accounts Committee
hearing last week it was acting chairman of HMRC Dave
Hartnett who complained about delaying tactics.

‘An issue we are very worried about is that some advisers are delaying a
challenge to tax schemes wherever they can. We are meeting obstacles at every
stage. Our right to ask for information is challenged and our interpretation of
the law is challenged,’ Hartnett said.

The boss of HMRC explained that the practice of delaying HMRC whenever had
developed as a result of the success of the disclosure regime ­ a mechanism that
requires all tax advisers to notify HMRC of any tax schemes they have sold to

The disclosure regime has been very successful in reducing the number of tax
avoidance schemes marketed to taxpayers, but now bands of advisers have
responded by litigating aggressively to slow HMRC investigations down.

‘Those that are devising schemes have a big skin in the game and they will
want to defend those schemes,’ Hartnett said.

The success of the disclosure regime has prompted advisers to develop other
strategies too.

Hartnett said there were pockets of advisers who were designing bespoke,
niche avoidance schemes to business, and that a pattern was emerging where
companies would move brands into an offshore company and then pay for the use of
the brand in order to skirt tax.

The use of aggressive litigation and the design of bespoke schemes are the
latest techniques used to duck the disclosure regime.

HMRC has previously said that it was encountering cases where advisers would
simply refuse to respond to letters on schemes and make any other kind of
correspondence difficult.

Hartnett also commented on the case for tax simplification. MPs had suggested
that simplifying the way companies made tax returns would make it easier for
HMRC to collect more tax, and pinpoint companies that weren’t paying as much as
they should.

‘If you look at how global business and commerce has developed, it has become
more complicated and I remain to be convinced that simplifying corporation tax
will increase yield,’ Hartnett said.

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