George Bull

Written by: George Bull

George Bull

Senior Tax Partner

HMRC's handling of tax investigations under scrutiny

It's an old question, but who investigates the investigators? In the case of HMRC, it's the Treasury Sub-Committee of the House of Commons.

In its day-to-day workings, HMRC deals with a wide range of investigations and tax disputes. Although HMRC has internal governance processes which are intended to ensure that it deals with all tax disputes fairly and in an even-handed manner, hardly a week passes without a tax tribunal making a finding against HMRC because of the way it has handled aspects of a dispute.

Often, tribunal cases raise questions about basic record-keeping and controls within HMRC. Other cases leave observers wondering about the decision-making processes within HMRC which resulted in small or questionable appeals being heard at considerable public expense.

And then there's the use of HMRC powers. Quite reasonably, Parliament has given HMRC substantial statutory powers to do what by any standards is a very difficult job. But too often the way in which the power is used, or the powers which HMRC invokes in a particular situation, appears disproportionate and heavy-handed.

It's in everybody's interest that HMRC is properly equipped to deal with tax disputes, but the growing concerns I have outlined above seem to be behind the Treasury Sub-Committee's decision to examine HMRC's approach to conducting tax enquiries, resolving tax disputes and determining the amount of tax to be paid.

The Treasury Sub-Committee has therefore invited written submissions to the following questions.

  • How do HMRC governance and settlement processes affect its ability to resolve tax disputes in a proportionate and fair way?
  • Does HMRC’s litigation and settlement strategy provide a rational and sound framework for resolving tax disputes?
  • Do HMRC’s collection and management powers set out in the Commissioners for Revenue and Customs Act 2005 provide HMRC with sufficient flexibility to achieve cost-effective and fair results?
  • Does HMRC’s approach to enforcing compliance with tax law, including its approach to penalties and other sanctions, result in disproportionate or unjust outcomes? If so, how can the situation be remedied?
  • Is there sufficient governance over the whole of HMRC’s enquiry process to ensure that HMRC’s interventions are well-targeted and that taxpayers are treated fairly and professionally throughout?
  • Do HMRC’s governance processes provide sufficient scrutiny and assurance for clearances and approvals given to taxpayers outside the formal enquiry process?

It seems a long time since HMRC ceased to describe taxpayers as ‘taxpayers’ and began to call us all ‘customers’. Whether you feel like a taxpayer or a customer of the tax department, it's clear from these questions that the Treasury Sub-Committee wishes to ensure that people who get caught up in tax disputes with HMRC are treated fairly, proportionately and professionally.

If you'd like to contribute your responses to these questions, you have until 31 May to do so.

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