Is Dave Hartnett going soft?
HMRC is planning to tone down its hardline stance on legal action against companies it thinks are evading tax.
In an interview with Vanessa Houlder of the Financial Times, HMRC permanent secretary for tax Dave Hartnett admitted, "We are sometimes too black-and-white about the law."
The interview appears to signal a more conciliatory approach to litigation as part of a wider efficiency drive. The strategy introduced in 2007 had been misunderstood internally, Hartnett said, leading some staff members to think they were armed with a "great sword of justice". By being more co-operative in corporate tax disputes, Hartnett expected the department to benefit from a surge in revenue.
In cases based around conflicts of legal interpretation, HMRC officials will be encouraged to seek settlements that enable them to collect plausible amounts of tax due. The Revenue is also planning a pilot project to try out third-party mediation.
The recent £1.25bn settlement of the five-year dispute with Vodafone was an early indication of the policy change, the FT suggested.
Robert Hartley, legal director in the tax practice at DLA Piper's litigation and regulatory group, commented that the Litigation and Settlements Strategy (LSS) was a relatively short, straightforward document that would be unlikely to cause a logjam because of misunderstandings.
"The LSS pre-dates changes to the costs rules in the Tax Tribunals," he added. "These changes meant for the first time that HMRC can be made to reimburse taxpayers some or all of their costs where HMRC loses a case relating to direct taxes such as corporation and income tax. Since HMRC loses around one case for every two that it wins, those additional costs could be quite substantial. Add all those things up and HMRC are left with an overly stringent litigation strategy drafted at the height of a boom but which now has to be applied after the bust.
"A change in approach is understandable, and no-one would seriously complain if that means HMRC are more open to compromise. Unless the LSS is amended to indicate when this less combative approach will apply, however, we will lose the one benefit the LSS was supposed to provide: a uniform approach from HMRC which attempted to ensure parity amongst all taxpayers."
An HMRC spokesperson told AccountingWEB.co.uk: "HMRC is committed to tackling avoidance. HMRC's strategy is to design out opportunities for avoidance as far as possible; to detect avoidance early; and to respond it to it quickly - by advising ministers on changing the law or by investigation and if necessary litigation.
"As Dave Hartnett made clear, HMRC will pursue litigation where HMRC has a strong case and agreement cannot be reached by other means. But disputes between HMRC and taxpayers are time-consuming and expensive for both sides and HMRC will always seek to resolve issues if possible without recourse to litigation. HMRC is exploring alternative ways of resolving disputes - but with the aim of getting the right answer for the Exchequer and for the taxpayer, recognising that that there is sometimes room for negotiation on what the right answer is."
Well done John
Vanessa's piece is also spot on I'm sure. But some commentators (elsewhere) are misinterpreting the message and being mischievous, or are overly naive as regards their knowledge of HMRC.
No time now so I'm going to blog about this on Sunday and will add a link here when I do.
Bottom line, as you well know, I'm sure Dave's not going soft. I doubt it's even possible!
Mark Lee
"Dave" needs to get a grip - but I wont hold my breath.
"....and HMRC will always seek to resolve issues if possible without recourse to litigation. "
Or to put it in plain english - "instead of trying to prove our case we will harass and bully taxpayers with constant threats until they pay us what we want whether they owe it or not".
High profile cases are one thing, but, every day thousands of small taxpayers, self employed individuals struggling to make a living, and certainly without the funds to fight complex court battles, are bullied and harrassed by HMRC into paying bills they dont owe just to get rid of HMRCs threats.
HMRC are, without doubt, grossly incompetent and staffed by people, many of whom have a serious attitude problem. Only recently a client was told, on tape, by a so called "senior" officer - "we are the Inland Revenue, you cant sue us". Needless to say that tape is now an exhibit and action was filed within 24 hours naming the officer concerned.
Unfortunately this belief that HMRC are a law unto themselves and are above the law is all too common within HMRC.
It's even worse
CD notes: Only recently a client was told, on tape, by a so called "senior" officer - "we are the Inland Revenue, you cant sue us".
-----
That's disgraceful. A 'senior' officer referring to HMRC as 'Inland Revenue' more than 5 yerars after the merger that replaced IR with HMRC.
Mark
Changing the management is the answer, not changing the name.
........ 5 years after the merger that replaced IR with HMRC.
Mark
Posted by bookmarklee on Sun, 22/08/2010 - 11:19
Which itself was a disgraceful waste of public money by the last inept government. Talk about "change the name and do the same".
As promised
My commentary on the FT piece:
http://taxadvicenetwork.blogspot.com/2010/08/dont-be-fooled-hmrc-are-not-going-soft.html
Mark
Copy and paste - why do I keep seeing all this on various posts?
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@mouse007
You cannot copy and paste straight from Word I am afraid - there is lots of hidden code in Word which carries over onto our site but actually shows up once you submit your comment.
Either type directly into the comment box or copy it into Notepad which is text-based only. Alternatively, if you must come from Word, you can paste it through the icon at the top of the comment box which shows a clipboard with a blue 'W' on it.
Hope that helps.
HMRC response to AccountingWEB questions
I asked HMRC if it would clarify a number of issues concerning the Litigation and Settlements strategy, for example on the reduction in litigation provisions from £8.1bn at 31 March 2009 to £4.4bn on 31 March 2010, and whether the conciliatory approach would be extended to small companies fighting cases on issues such as s660a settlements and IR35.
This was the official response: "HMRC is committed to tackling avoidance. HMRC's strategy is to design out opportunities for avoidance as far as possible; to detect avoidance early; and to respond it to it quickly - by advising Ministers on changing the law or by investigation and if necessary litigation. As Dave Hartnett made clear, HMRC will pursue litigation where HMRC has a strong case and agreement cannot be reached by other means. But disputes between HMRC and taxpayers are time-consuming and expensive for both sides and HMRC will always seek to resolve issues if possible without recourse to litigation. HMRC is exploring alternative ways of resolving disputes - but with the aim of getting the right answer for the Exchequer and for the taxpayer, recognising that that there is sometimes room for negotiation on what the right answer is.”