This week's opinion: 17 September 2020

How much disclosure should be made in a tax return? If somebody receives rental income they must include it, but what about questions of interpretation? Say I have bought an asset that I believe will qualify for capital allowances but HMRC may consider otherwise. One view is that no further disclosure is required: by signing the tax return declaration I am confirming that I believe allowances are due. But equally the Professional Conduct in Relation to Taxation requires (at para 19) advisers to consider whether a greater level of disclosure might be appropriate. 

So I was interested in HMRC chief executive Jim Harra’s recent comment, in evidence before the House of Commons public accounts committee, that HMRC wants, ‘first, to promote a conservative approach by taxpayers to whether they are going to challenge our legal interpretations and therefore to discourage them from taking strained interpretations, and, second, to encourage their transparency with us, so that we know when they are filing based on a contentious position’. 

Transparency is one thing but promoting a conservative approach is quite another. Most taxpayers may be happy to take that approach because they want a quiet life and no interaction with HMRC. But in tax there are no clear boundaries, and, within the law, taxpayers must surely have the right to decide what approach is right for them. The Keith Committee in the 1980s proposed that taxpayers should disclose when they had given themselves the benefit of the doubt. That was rejected. If we are to return to something like that concept let’s have an open debate about what is desirable and practical. 

If you do one thing...