HMRC tax stance; time for change?

HMRC is denying a softening of its stance on tax disputes. But tax issues are seldom black and white. Surely a return to proper negotiation on areas of genuine difference of opinion can only be a good thing,

Confusion reigns. Dave Hartnett, permanent secretary at Her Majesty’s Revenue and Customs, has caused something of a stir with comments supposedly made in an article in the Financial Times last week.

Hartnett’s musings were interpreted as a softening of HMRC’s stance on tax disputes and a pledge to adopt a less combative approach to resolving tax disputes with business in order to “cut a mounting legal logjam and unlock billions of pounds tied up in court over avoidance.”

According to the FT Hartnett said there had been examples of officials being too “tough” in disputes over tax assessments. He is also quoted as saying that HMRC is sometimes “too black and white about the law.”

Now, it certainly wouldn’t be the first time that a newspaper or journalist has got the wrong end of the stick, but the interest that the story generated, not least among professional advisers, has highlighted just what a can of worms this is.

HMRC was relatively quick to “set the record straight” and assert that it would not be changing its approach to tax avoidance. But not before various statements had been issued welcoming the new stance.

The saga does add a certain ambiguity to the coalition Government’s stance on what constitutes the “rightful” paying of tax. During Labour’s time in office it evolved into a largely moral debate, where the boundaries between tax avoidance and tax evasion became increasingly blurred.

And the debate has been further fuelled by the appointment of Sir Philip Green to lead the Government Efficiency Review. Green's tax status has been called in to question on numerous occasions, most recently after he signed over legal ownership of his business empire wife Christina who, coincidentally, lives in the tax haven of Monaco.

Officials will meet in Whitehall this month to debate proposals to introduce a general anti-avoidance rule (GAAR) to ensure individuals are not able to exploit loopholes. Arguments for and against a GAAR aside, it’s not yet clear how Government policy will evolve in this area, although Deputy Prime Minister Nick Clegg has laid his cards on the table by stating recently that he wanted to “ensure wealthy individuals pay their fair share of tax”.

One thing is for sure; tax issues are seldom black and white and many advisers seem to be of the opinion that a return to proper negotiation on areas of genuine difference of opinion can only be seen as a good thing, not least in terms of removing huge amounts of uncertainty for tax advisors and payers alike. As far as the Chancellor’s coffers are concerned, and optimising the Exchequer’s net tax take, surely it has got to be the way forward.