Advisers and tax investigations insurers expect HM Revenue & Customs to
relax its stance on litigation in a major policy change to bring money into the
government’s coffers through negotiated settlements rather than aggressive legal
Investigation consultants from Abbey Tax Protection, flagged up the new
initiative within HMRC which has been dubbed the ‘Dash for Cash’.
Unlike previously, the taxman will not necessarily take court action even if
it believes it has a strong legal case.
Abbey Tax Protection which provides insurance for customers dealing with HMRC
probes said tax inspectors were being told to change tack and use their
discretion to settle cases at an accellorated pace.
“We understand there will be pressure to settle long running full enquiry
cases and inspectors will be encouraged to take up aspect cases which are likely
to be settled more quickly to optimise the tax yield in the current fiscal year,
” Abbey Tax Protection said.
Opinion has been split in the profession. Some advisers fear that the change
will actually see more of their clients being targeted through “aspect cases”,
which are more focused probes, compared to the full-blown enquiry cases.
“This is a concern,” said Cathy Corns of Mercer & Hole.
However, Mike Warburton, tax partner at Grant Thornton, welcomed the move in
terms of avoiding lengthy and expensive litigation.
“Before the Revenue was very, very firm. If there was a strong case, they
would litigate, but now they appear to be saying it’s up to the discretion of
Abbey said in recent weeks HMRC inspectors they had contacted said “they are
being tasked to bring in as much money as possible, as quickly as possible,
which is not really surprising given the current economic environment.”
Abbey Tax Protection warned investigations activity will remain at the
forefront of HMRC’s activities to close the tax gap, estimated to be £40bn.
“There is every intention to use its information powers and the penalty
regime to tackle evasion, the hidden economy, reducing the failure of taxpayers
to take reasonable care and even for resolving issues of legal interpretation,
which together amount to an estimated 55% of the behaviours which determine the
value of the tax gap,” the company added.
A statement from HMRC said: “HMRC is committed to reducing the tax gap by
£4bn by 2010/11. We aim to achieve this where possible through discussion and
consensus but it would be wrong to compromise where we are clear that our
analysis of the law as passed by Parliament is the right one.
“We are aiming to resolve issues as they arise, reducing the number of
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