HMRC HAS ATTRACTED “significant media criticism” over its dealings with large corporate clients, a report by the Treasury has warned. The report into the tax-gap, published by a senior Treasury committee, raises concerns that such deals may risk “damage to HMRC’s reputation” and make other taxpayers unwilling to comply with their tax obligations.
The findings come as the relationship between HMRC and large companies is facing increasing scrutiny. A commons public accounts committee last year criticised HMRC for ‘sweetheart deals’ for large companies such as Vodafone and Goldman Sachs. Committee chair Margaret Hodge described a “veil of secrecy” around deals made around the revenue’s dealings with large corporate taxpayers.
The report addresses the secrecy which surrounds dealings between HMRC and large business, suggesting that although the taxman should continue to work closely with such businesses in order to ensure that tax obligations are met, “the processes by which large tax cases are settled must be in a relationship based on openness and transparency and it is vital that appropriate checks be in place so that other taxpayers can be sure that all taxpayers are receiving the same treatment from HMRC”.
The transparency and account that the committee advises may be difficult to achieve given the revenue’s current legal and political status. HMRC officials stated that in order to protect taxpayer confidentiality they could not discuss individual cases with the committee. HMRC, which is a non-ministerial department, is intended to be independent of politicians.
The committee found competing needs for accountability and independence, and raised a number of issues for future examination, including the legal status and corporate governance of HMRC.
Addressing the issue of corporate governance, the report states that “We recommend that the assurance commissioner appear before this committee as a matter of course after the publication of the proposed annual report on the outcome of HMRC’s dispute work.” The committee endorsed plans to create a new assurance role at commissioner level, with a specific remit to challenge decision making on cases. The report goes on to recommend that the assurance committee go in front of the Treasury sub-committee as a matter of course.
The committee was also concerned by incidents where tax settlements had been approved by commissioners who had participated in negotiations. The report condones new arrangements to ensure “clear separation between the analysis and negotiation phase of resolving a dispute and the approval of the proposed settlement”.
The committee has little time for the taxman’s claims that the amounts of money lost in one large tax case was proportionately small, warning that “to ordinary taxpayers, a sum which may run into millions of pounds is not trivial”.
Responding to the HMRC plans to introduce a code of governance for tax dispute resolution, the report said: “We recommend that HMRC’s proposed code of governance for tax dispute resolution be explicit that the same rules apply to settlement of tax disputes with its large corporate customers as apply to settlements with all other taxpayers.”
There are 50 forces leading change in the global public sector that accountants need to prepare for, say ACCA
Companies must report on their complex financial structures including offshore accounts and notify HMRC
An examination by the Public Accounts Committee (PAC) has revealed serious concerns relating to HMRC’s plans
Andrew Tyrie suggests there will not be enough time to implement Making Tax Digital (MTD) by April 2018