TaxAdministrationLeader: HMRC on the offensive

Leader: HMRC on the offensive

Why have arrests by HMRC taken so long in coming… Sage will have to play catch up on iXBRL… Big Four face up to a break up

THAT HM REVENUE & CUSTOMS should have arrested two people for tax avoidance as part of the current crackdown on overseas accounts should not really come as a surprise to anybody. The real surprise is that it should have taken this long. The first amnesties, or disclosure facilities, offered by the taxman were unveiled in 2007 with the underlying threat that they might lead to criminal prosecution in some cases. Campaigners wanted the taxman to deliver on that but the taxman has moved with caution. Now that it has moved, it is a clear sign that attitudes have changed, patience is wearing thin and the carrot of the amnesties has been replaced with a stick. The taxman is now in an aggressive posture. The Treasury is desperate for revenues and the coalition is convinced there is more to be had from a clampdown on avoidance and evasion. Taxpayers using overseas accounts will need to think clearly about their behaviour and advisers will need to take care they don’t become tainted by association.

Not very sage tactics

Sage, the giant accounting software provider, is this week slightly humbled after Accountancy Age revealed it would fall short in its efforts to provide kit that will enable users to make tax returns using the new computer language iXBRL by the deadline of 1 April this year. Other software houses have met the deadline, some of them only small operators with scant resources.

Sage says that its decision to offer only a temporary fix is to alleviate the workload of its clients, but to most people it looks an embarrassing inability to get their act together. Even Sage’s share price took a tumble after the news. A temporary fix is a temporary fix. It fails to meet the need for users to have the simplest solution possible. As it is, users will need to go through further processes if they want the fully functioning iXBRL software when Sage releases it. Competitors are leaping on the opportunity to offer free transfers to alternative software. Sage will need to play catch up if it wants to keep the goodwill of its customers and its reputation intact.

Breaking up is hard to do

Further pressure has emerged for breaking up the Big Four. City agitators and the former City minister Lord Myners have floated the idea while employment minister Ed Davey has suggested it is not such a wise idea. In a strange way the debate resembles the argument about breaking up the big banks. In the case of the banks the driver is avoiding global economic meltdown. With the Big Four the issue is the audit market and the regulatory risk that could come from losing of the four big players. There is an argument to be made that the regulatory risks can be resolved with forcing a break-up. The big question will be whether regulators in Europe will see that as being enough in the current environment. It will require very brave – or foolish – intervention to make such a move.

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