The Treasury Sub-Committee's new report 'Disputing Tax' focuses on its two ongoing tax-related inquiries, covering the steps that HMRC has taken to address public concerns around tax avoidance and evasion and HMRC’s approach to conducting tax enquiries and resolving tax disputes and makes new recommendations to HMRC and to the professional bodies.
By 2012 HMRC were dealing with an estimated 105,000 open cases involving tax avoidance schemes. The tax avoidance landscape changed in 2017 following the introduction of the Professional Conduct in Relation to Taxation standard that now applies across seven tax and accounting bodies. It is unclear how much tax has been lost due to the use of abusive tax avoidance schemes.
Tax avoidance
The committee notes that "It is important for Parliament and taxpayers to be confident that HMRC has a robust picture of the number of people that are involved in tax avoidance schemes or whose past involvement in tax avoidance remains unresolved, how much tax is at risk and the years involved."
It recommends that HMRC:
- Should write to the Treasury Committee on an annual basis with a summary of the number and characteristics (sector, income, profile etc) of people it knows to be involved in tax avoidance schemes.
- Provides an update on the number of cases that have been brought to a conclusion under the Contractor Loan Settlement Opportunity—and how many of the liable population chose not to take it up
- Works with the professional bodies to consider whether their standards are sufficiently clear about conduct relating to all stages at which their members may be called upon to provide advice on tax avoidance, including stages leading up to settlement of a tax dispute. HMRC should report back to the Committee with progress against this recommendation by June 2020.
- Should vigorously pursue the promoters and enablers of avoidance schemes to the full extent of their powers—whether they are members of a professional body or not. We recommend that HMRC produces a clear strategy for dealing with tax advisers that continue to promote or enable tax avoidance and we look forward to receiving details of this.
- Produces an annual report on what Common Reporting Standard (CRS) data reveals about the scope and scale of offshore non-compliance, including any particular areas of risks identified and how it is addressing those risks.
- Ensures that it leaves good time to ensure that enquiries are opened and, where necessary, assessments made or amended in judging the potential impact of the use of extended time limits.
- Sets out which—if any—powers and measures it feels need tightening or enhancing through legislation, as well as which resources need strengthening when it comes to dealing with offshore promoters, taxpayers or jurisdictions concerning tax avoidance and evasion.
- Engages with the professional bodies in the UK that are signatories to the Professional Conduct in Relation to Taxation standards. In its response to this Report, HMRC should report back to us on progress made on the work referenced in its No Safe Havens 2019 Report on promoting comparable standards for UK tax advice in other jurisdictions.
Dispute resolution
Key recommendations include that HMRC
- Provides a clearer explanation of its definition of ‘vulnerable’ when it comes to identifying this sub-set of customers
- Reports on how it has reflected on the insights of groups such as the Low Incomes Tax Reform Group, the tax charities and other advice bodies to gain a full insight into the difficulties faced by taxpayers who cannot afford to pay for advice.
- Urgently reviews and improves the accessibility, quality and level of detail of guidance it makes available to vulnerable taxpayers
Adding that "We have heard that HMRC may be being particularly strict in applying penalties to large corporate businesses and take this opportunity to remind the tax authority that it must be fair and consistent in its application of tax measures."
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