HM Revenue & Customs has been accused of building “little transparency” into the way it reaches settlements with big businesses over their tax liabilities.
The views came from MP Margaret Hodge, chairman of the Commons public accounts committee, in a report on the performance of HMRC. The report also saw Hodge accuse HMRC of “mismanagement” over its handling of the PAYE debacle last year.
It has now been confirmed that the National Audit Office will examine the way HMRC reaches aggrement on tax with big companies, including the controversial deal between the taxman and telecoms giant Vodafone.
The NAO made it clear there is no question of re-opening the Vodafone case itself and auditing the settlement reached, but a spokesman said that “we will be looking more generally at the governance and effectiveness of the procedures for reaching such settlements”.
The review means the public spending watchdog is reviewing the taxman’s “dash for cash” strategy, which saw a switch from pursuing litigation to negotiating tax settlements with large corporations.
Committee chairman Margaret Hodge said: “While taxpayer confidentiality must be preserved, the NAO will now review the procedures for settling such disputes and we expect the department to cooperate with this review.”
She added that there was “little transparency for the taxpayer over the way that tax disputes with large companies are resolved”.
The sums involved in this and other cases are so large that NAO head Amyas Morse believes the area merits examination as part of the NAO’s annual review of HMRC now under way.
In the middle of last year it was reported Vodafone had reached £1.25bn settlement with the taxman over tax payable on its Luxembourg subsidiary.
An NAO spokesman revealed the Vodafone case and others would have been taken into account in deciding to undertake the review. While it would not go into individual cases, the review is expected to look at how settlements are reached.But he said: “We do have access to individual tax records.”
Asked if the investigation will include a review of the process that lead to the Vodafone settlement, he said: “It may do. Our work is at an early stage and we have yet to determine which cases we will look at in undertaking the review.”
A statement from HMRC said: “As part of its standard annual review, NAO is looking at the settlement of disputes, from the smallest to the largest, and considering our processes, both internal and external and including those involving tribunals.”
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