Dispute resolution with HMRC has changed out of all recognition since the controversy a few years ago over the so-called 'sweetheart' deals with Vodafone and Goldman Sachs. There is now a formalised structure within HMRC for the handling of complex and high-value disputes and an annual report on dispute resolution is published. A number of things struck me about the latest report published last week.
The first is that the process is clearly not simply a rubber-stamping of decisions already made: there is a broad 50-50 split between cases where the Assurance Commissioner and his team accepted the settlement proposals put to it and those where the proposal was rejected or referred back for further work.
This does suggest that there are robust processes in place, although it is worth noting that only a tiny number of disputes (less than 50) actually got as far as being considered at this level.
My own experience reinforces the view that there is much more rigour in the governance of dispute resolution with HMRC than there used to be. This can be extremely frustrating: getting agreement to any form of settlement (even one which is favourable to HMRC) is much more protracted than before. That is, I suppose an inevitable consequence of putting a formal process round dispute resolution to reassure taxpayers as a whole there are no special deals.
The second is the admission in the report that there are a number of cases where HMRC have failed to raise assessments or enquiries within the appropriate time limits and are therefore unable to collect tax which they would otherwise have been able to recover. HMRC got into trouble with the Public Accounts Committee over this issue a couple of years ago and it is surprising to find it is still a problem.
Finally, there is the question of HMRC’s success rate in litigation on avoidance schemes. HMRC have said for some time now that their success rate is 80 per cent. But we have never seen the make-up of this figure.
This firm submitted a freedom of information request to HMRC for a list of the relevant cases earlier this year but we were not given the specific information. I am pleased to say that accompanying this year’s report is a list of the cases and their outcomes. Of the 26 cases listed, HMRC lost only two with one other being a split decision. I think that in a couple of cases HMRC may have been stretching a point to say that they involved avoidance (one of them was essentially a share valuation dispute) but the trend is clear. HMRC clearly want to gain the best possible advantage while the courts are minded to strike down schemes: the annual report states that HMRC is “gearing up to triple the flow of avoidance cases into litigation”. Let’s hope that whatever the outcome HMRC continues to publish its successes and failures. Transparency is not a one way street.
If you would like any more information on this issue please get in touch with Andrew Hubbard, or your usual RSM contact.