MPs grill HMRC over accounts and new powers

HMRC's chief executive, Lin Homer, has told MPs that it will let the National Audit Office check its forecasts for tax collection after it miscalculated figures by £1.9bn a year.

Homer and other HMRC board directors also told MPs on the Public Accounts Committee that new "accelerated payments" powers, which will require those using a listed tax avoidance scheme to pay the dispute tax up-front, will be a "game changer" in countering avoidance.

The committee was discussing HMRC's latest accounts.

Homer apologised for the error in the figure its performance was judged against but said there was not need to change it's internal procedures to stop it making a similar error again.

Homer defended the accuracy of HMRC's estimates for how much tax loss it has prevented (by things such as campaigns to raise public awareness about penalties for tax evasion). Judging HMRC only on the tax it collects is a bit like judging fire services only on fires they put out not fires they prevent, Homer told PAC chair Margaret Hodge.

MPs asked HMRC if they were tough enough on corporate tax avoidance and how it decided whether to go to court or settle out of court.

Jim Harra, HMRC's director general of business tax, said HMRC won 80% of it's litigation over tax avoidance. It will go to court it if reckons it will get more tax than if it settles with a taxpayer, he said. 

He said he was "disappointed" with an upper-tribunal ruling about Rangers Football Club's use of employee benefit trusts, which ruled against HMRC.

Accelerated payments powers, which are due to be introduced in the Finance Bill 2014, would be a "game changer" and "change the economics of tax avoidance", Harra said.

These new powers should mean that HMRC has to go to court less to shut down tax avoidance schemes, saving it time and money. 

Some MPs were not satisfied, though.

Hodge asked why it takes HMRC so long to challenge big avoidance schemes in the tribunals.

The Liberty avoidance scheme, for example, which was reportedly used by various celebrities, was promoted in 2005 but probably won't be challenged in a tax tribunal until the autumn.

Homer admitted that it takes too long in some cases but said accelerated payments powers would help it act quicker.

MPs also asked HMRC about it's dealings with small and medium-sized businesses.

HMRC said its Time To Pay scheme, which allows small businesses more time to pay tax debts, was working well, as were campaigns to deter tax evasion.

Comments

APNs will help HMRC move quicker??    1 thanks

Cynical_Templar | | Permalink

What planet do these people think we live on?  So having a payment on account of the tax disputed is an incentive to HMRC to get the scheme litigated to an outcome is it?  How do these statements go unchallenged. ?

First tier tribunal    2 thanks

the_Poacher | | Permalink

if you think HMRC is being slow progressing the case then you can ask the FTT to hear your case, that should speed them up. Sadly some unscrupulous agents use delaying tactics hoping that HMRC will give up or just to manage their client's cash flow. making the client pay up front eliminates the cash flow advantage and cuts down on agent delay

HMRC have no incentive to litigate    2 thanks

mbuffery | | Permalink

Having experienced at first hand the delaying and stalling tactics used by HMRC in a complex VAT case - where they had to be dragged to the Tribunal and eventually lost, I think it would be safe to say that once HMRC have taken the tax up front, there will be no incentive to litigate, and risk losing.  They will instead use every delaying tactic in the book, in the hope that the taxpayer will give up or run out of money.  It may well have been the case that agents in the past have delayed the hearing of these cases, since it benefited their clients as regards cash flow.  The reverse will now be true - the difference is that HMRC have the deeper pockets. 

Taxpayer confidentiality - optional?    2 thanks

Graeme Lindsay Abdn | | Permalink

Mr Harra's comment regarding the Rangers case struck me as odd, given HMRC's previous insistence it is unable to comment on individual cases due to taxpayer confidentiality!

billgilcom's picture

Only when it suits them

billgilcom | | Permalink

Graeme Lindsay Abdn wrote:

Mr Harra's comment regarding the Rangers case struck me as odd, given HMRC's previous insistence it is unable to comment on individual cases due to taxpayer confidentiality!

     Of course HMRC won't comment on cases - dream on ..... especially when the results are public they will comment when it suits them. Of course it was disappointing as all those EBT cases might now follow Mr Murray and his sons and raise a glass to them. At least it might stop HMRC issuing follower/APN letters where EBT's are the issue but of course they might now look to get powers for cases where the tribunals have found against them to refer them to another arbiter and stop the need for them to action the result that doesn't suit them.  He may be "disappointed" but until the Upper Tribunal is overruled they have got it 100% correct and is the law of the land

Is it me?

Vaughan Blake1 | | Permalink

Or does this totally miss the point?

"Judging HMRC only on the tax it collects is a bit like judging fire services only on fires they put out not fires they prevent", Homer told PAC chair Margaret Hodge.

No it isn't Lin, because if you prevent tax loss it means you must have collected it!