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Is Dave Hartnett going soft?

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20th Aug 2010
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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."

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
20th Aug 2010 17:42

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.”

 

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Mark Lee headshot 2023
By Mark Lee
20th Aug 2010 19:21

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

www.Tax-Buzz.co.uk 

 

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By cymraeg_draig
21st Aug 2010 09:52

"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.

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By Trevor Scott
21st Aug 2010 11:25

Public relations

"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.”

The above is public relations claptrap, nothing more, nothing less. Could have been written by any politically astute person from any tax collecting organisation in the world.

Sadly....the reality, for many years, is as described in CD's post.

A tax collecting organisation can always be kept beating away to some degree, but surely the warning signs are all too visible to even the treasury. While I realise they probably wouldn't want to be seen to directly politicise HMRC, unlike the previous lot, George Osborne has no shortage of reasons and evidence to justify a severe clear out of senior HMRC management. I suspect they will duck serious change to sort the place out, it would require serious investment of money and capable/performing personnel.

 

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Mark Lee headshot 2023
By Mark Lee
22nd Aug 2010 11:19

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

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By cymraeg_draig
22nd Aug 2010 14:31

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".

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Mark Lee headshot 2023
By Mark Lee
22nd Aug 2010 17:35
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By JackHarper
23rd Aug 2010 12:21

The Psychopathology of HMRC

One aspect is illustrated by this apparent partial U-turn. HMRC is intellectually dishonest. It is modestly amenable to political pressure. Fortunately its operatives are unarmed (for an armed example see The Taliban) but still at large and able to harm people (unlike Broadmoor patients). Raoul Moate would have made it big as an HMRC senior investigator.

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By ThornyIssues
23rd Aug 2010 12:52

Ha, ha, ha, ho, ho ho

To hark back to my childhood TV days ..... "Whiteman speak with forked tongue!" or maybe "Tonto, is that you?" would be slightly more politically correct.

Anyway, ..... it is all bull testicles. Two very important things are abundantly clear here . Firstly he continues to propogate the "avoidance equals evaison" obfuscation that HMRC have been engaged in for the last few years. The accountancy profession needs to join with other bodies to counter this.  Secondly, if that is official policy, why have HMRC burned taxpayer money winning only three out of over 1600 IR35 that the PCG has taken to the Special Commissioners. Why did they burn tens of thousands of taxpayer's Pounds taking the Arctic Systems Ltd S660A case all the was to the House of Lords .... and still lost. Only last week, we learn that they are still trying to bring S660A cases.

It really does beggar belief!

 

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By mikewhit
26th Aug 2010 12:42

"HMRC is committed to tackling avoidance"

Shouldn't they make evasion their priority ?

Or are they really going to go after offshore BHS dividend payees ?

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By Mouse007
26th Aug 2010 22:08

Copy and paste - why do I keep seeing all this on various posts?

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By Becky Midgley
27th Aug 2010 10:20

@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.

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By mikewhit
31st Aug 2010 17:24

Spelling check

But (as I mentioned in an un-answered Any Answers a while back) the brower spelling checker now no longer works in the 'new' AW text entry form, so perhaps that's why people have started using Word.

Could I ask two things:

1. that your techies look into why (e.g. Firefox) browser spell checkers no longer function

2. that they look at stripping from pasted clipboard text any attached superfluous formatting attributes that would otherwise get displayed

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