Simon Sweetman was an inspector of taxes for 18 years. He left the Inland Revenue in 1989 to join Chartered Accountants Scrutton Goodchild & Sanderson, later part of Scrutton Bland, where he was successively a senior manager and later a partner. He has been an independent consultant since 2001. He is a former member of the tax policy unit of the Federation of Small Businesses and the small business working group of the Chartered Institute of Taxation. He is also on the tax law review committee of the Institute for Fiscal Studies and is currently chair of the Working Together group for the Suffolk and North Essex area.
HMRC: Are we seeing what we want to see?
As all the world knows (well, that bit of the world that we belong to) Dave Hartnett has announced HMRC's plans to tone down its hardline stance on legal action against companies it thinks are evading tax.
This has produced a wild range of responses, from those who accuse HMRC of being soft on tax evasion while hammering the small fry who fraudulently claim benefits, to those who assume the leopard cannot change its spots and see it as some kind of trap or cunning plan. There also seem to be those who merely want another opportunity to abuse HMRC, or, interestingly, the last government (but not this one - which, if there is any leaning on HMRC being done, must be the one that’s doing it).
But what did our man actually say? He was talking about the litigation strategy, not about the general approach to what one might still term ‘enquiry’ work. That strategy determines which cases roll through the courts, eating up resources in money and manpower as they go, stuffing the jaws of Counsel with gold like so many Molochs. One might not want to see HMRC going into a Jarndyce v Jarndyce situation (even Arctic Systems didn’t last that long) and I suspect that those who bash the Revenue for seeking compromise on occasions are the same as the ones who bash it for carrying on to the bitter end.
Even 30 years ago, as an inspector of taxes (to use a largely nostalgic expression) one had to think first about the law, but then to think about the practicalities of applying it. First of all, would it be a complete waste of time because the money wasn’t there to pay the tax? Secondly, would it be a waste of resources because the sum involved was small and the opposition likely to be protracted? Thirdly, was the effect disproportionate in the problems it would cause?
We have all had experiences where HMRC officers pursued arguments despite the answers to those questions suggesting that it would make more sense to settle. But many contributors here seem to be unaware of the immense falling off in the number of S.9A enquiries being carried out, and that HMRC strategy has moved away from the use of that single blunt instrument.
Just because we saw something nasty in the HMRC woodshed some years ago, that doesn’t mean it’s still there. There are plenty of things to complain about but they are mostly about HMRC not doing things rather than doing them. Let’s maintain some sense of reality here.