The first report by the new Tax Assurance Commissioner at HMRC, detailing the department’s new approach to resolving disputes with taxpayers, has been published today.
The new role was announced in February 2012, as part of a package to strengthen HMRC’s governance arrangements in response to concerns about how tax disputes were handled.
Three Commissioners now make decisions in sensitive cases, those with more than £100 million tax under consideration – a reduction from the previous £250 million threshold – and a sample of cases where the tax involved is at least £10 million, but less than £100 million.
The report shows that, in the first six months under the new arrangements, the Tax Disputes Resolution Board referred 22 cases to the Commissioners for a decision. Eleven proposals by taxpayers worth £1,368 million were accepted, six proposals by taxpayers worth £285 million were accepted with conditions, and five of the proposals worth £398 million were rejected.
Edward Troup, Tax Assurance Commissioner and Second Permanent Secretary at HMRC, said:
The overwhelming majority of taxpayers pay the right amount of tax and pay it on time. But they need to be confident that we take action against those who do not do so, and that we apply the rules even-handedly to all taxpayers.
I oversee our decision-making process and, with two other Commissioners, I act as the final point of approval for settlements in the largest and most sensitive cases. This direct involvement in the oversight of large settlements, and scrutiny of the processes, allows me to provide assurance that we do consistently achieve the correct tax outcomes for the Exchequer under the law.
Resolving disputes by agreement is HMRC’s preferred approach, but it will take cases to litigation if an outcome consistent with the law cannot be achieved in any other way. Just over 4,000 appeals to the Tribunal were decided in 2011/12 (the latest year for which figures are available). The majority of these were individual disputes about the facts in a specific case, or the application of penalties, without wider impact or precedent value. However, each year there are also cases heard where the outcome could have significant implications for HMRC.
In 2012/13, 18 cases were heard in the Court of Appeal/Court of Session, and four in the Supreme Court, to which HMRC was a party. Fourteen of these confirmed HMRC’s argument, including significant decisions on the scope of legal professional privilege and the relief that can be given when trustees make decisions with unforeseen tax consequences. Six went against HMRC’s arguments and two judgments have not yet been issued. The courts also issued decisions on 33 avoidance cases, with 27 going in HMRC’s favour, protecting more than £1 billion of tax.
In 2012/13, litigation decisions across all cases decided in HMRC’s favour protected tax/revenue in the region of £10 billion. HMRC does not comment on the figures in these cases, as they will not always be in the public domain.
The Tax Commissioner’s report has been published today alongside the 2012/13 HMRC annual report and accounts.