HMRC is adopting an increasingly aggressive approach to taxpayers who choose to dispute a case involving perceived tax avoidance, explain Kate Ison and Aude Delechat of Berwin Leighton Paisner. HMRC inquiries: To pay or not to pay? It is estimated that there are currently more than 65,000 open cases involving marketed tax avoidance, many of which date back over four years. In a number of recent consultation papers, HMRC has proposed a range of controversial measures which will give HMRC power to require a taxpayer to pay disputed tax when HMRC has won another case involving similar facts. However, the power goes beyond simply requiring payment pending the outcome of an appeal. Taxpayers will effectively be forced to concede and accept HMRC’s application of the prior case, with very limited possibility to object or they will face heavy tax-geared penalties if they continue to pursue the dispute. The measures are intended to make it less attractive for taxpayers to maintain their position in a case involving tax avoidance pending the outcome of any similar litigation, with the aim of clearing the backlog of cases for an under-resourced HMRC. The current regime At present, in direct tax disputes there is no requirement for a taxpayer to pay the disputed tax pending any enquiry by HMRC. Where HMRC issues a closure notice or assessment, the starting point is that the taxpayer is then legally required to pay the disputed tax. However, where a taxpayer files an appeal against the assessment, it may request HMRC to postpone payment and collection of any disputed tax pending the decision of the first tier tribunal. Historically, as a matter of practice, HMRC has in general agreed to postpone payments. HMRC now appears to be concerned that by allowing the postponement of payment of disputed tax, it is enabling taxpayers to prolong disputes unnecessarily.
Posted on: Tue, 11 Mar 2014 05:40:27 +0000
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