War looms over tax talks

Four of the Big Six have refused to negotiate with the Inland Revenue until it resolves the chaos caused by an appeal court ruling which could leave clients open to prosecution if they own up to tax errors.

The Regina v W case, decided last month, overturned the 54-year-old ‘Hansard’ convention under which taxpayers agreeing a settlement with the Revenue escape prosecution. It also raised the question of whether the Revenue discloses details to the Crown Prosecution Service.

It unnerved the Big Six to such an extent that Coopers & Lybrand, Price Waterhouse, KPMG and Ernst & Young called an emergency meeting and decided they would not be making disclosures to the Revenue until they know whether the old agreement stands, and whether their ‘tax privacy’ will be respected.

Deloitte & Touche will continue to make disclosures to the Revenue, said Martyn Bridges, investigation services partner. ‘Having discussed the issue with counsel, we believe it is still appropriate to negotiate. But any settlement should be handled with great care as Hansard has never offered immunity,’ he said.

Losing Big Six co-operation could cost the government billions of pounds and wreck its spend-to-save programme.

‘This is double jeopardy,’ said John Whiting, head of personal tax at PW. ‘If you put your hands up to admit unpaid tax, you risk prosecution by the CPS. We used to advise clients to come clean, now we have to alert them to the implications.’

The Special Compliance Office, the Revenue’s investigations department, issued a statement to clear up the problem last week. One Big Six tax partner said it had done ‘still more damage’. He adds: ‘It says the CPS and the Revenue are liaising on this,’ he said. ‘That’s not what we want to hear.’

A Revenue spokesman referred to a Commons statement by the attorney general, who said: ‘The ruling accorded with the existing understanding of the CPS and Revenue as to their respective roles … it does not require any policy change.’