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Tax experts back department against PAC report
Tax experts have offered their support to HMRC, following the publication of a government report that claims the department has made insufficient progress in tackling avoidance and evasion.
The new document from the Public Accounts Committee (PAC) claims the Revenue has been neither transparent nor consistent when anticipating and measuring its compliance yield, the additional revenue generated through activities to identify and prevent losses arising from legal and illegal tax dodging.
The PAC – chaired by controversial MP Margaret Hodge – also attacks the tax department for being “unacceptably slow” in clamping down on avoidance for not doing enough to companies that “exploit international tax structures to minimise UK tax liabilities”.
But tax professionals pointed out the difficulties faced by HMRC, with law firm Pinsent Masons calling for greater political support for the taxman. The company’s head of litigation and compliance, James Bullock, said the Revenue should allowed to pursue a “radical new approach” that would clear the backlog of avoidance cases and free up resources to spend on evasion investigations.
“New powers enable HMRC to collect disputed tax upfront may act as a deterrent to those contemplating entering new schemes in the future, but the fact remains the department has open cases with 90,000 individuals.”
Bullock warned that without political backing to offer settlements in existing cases that provide a meaningful incentive to the taxpayer to settle, the Revenue will be “forced to devote massive resources to litigation in avoidance cases, rather than in the pursuit of tax evaders.
“With the tribunal system already creaking at the seams, there is a growing risk of avoidance cases that could have been settled collapsing simply because deadlines have been missed,” he added.
Chas Roy-Chowdhury, the head of tax at the Association of Chartered Certified Accountants, urged the government and public to be “mindful of the realities of tax collection”.
He said, “HMRC are understaffed and have a complicated job to do, because the tax system is complicated. When chasing unpaid tax, the Revenue needs to be able to make legal and fair settlements with businesses in a pragmatic way.”
Nevertheless, Roy-Chowdhury welcomed the PAC recommendation that the Treasury and HMRC report to Margaret Hodge and her committee on how international tax structures are exploited.
“Recent reforms implemented in the UK have been designed to attract international business, but it remains to be seen how effective they are and will be,” he added.
