No more 'sweetheart' deals with the taxman?

12 March 2012. Published by Adam Craggs, Partner

HMRC have recently announced new governance arrangements for "significant tax disputes".

According to HMRC's press release issued on 27 February 2012, the new procedure is intended to provide "greater transparency, scrutiny and accountability".

The new arrangements have been introduced as a result of the serious criticism levelled by the House of Commons Public Accounts Committee against HMRC in its sixty-first report published in December 2011 (see our previous blog of 21 December 2011).

The new arrangements

The key elements are:

  • The appointment of a new assurance Commissioner who will be responsible for overseeing all large settlements and "protecting the interests of taxpayers at large".  The assurance Commissioner will have no role in any individual taxpayer's affairs.
  • New rules under which all cases above £100 million will now be referred, with recommendations from a panel of senior tax professionals, to three "tax expert" Commissioners, one of whom will be the new assurance Commissioner.
  • A review programme, overseen by the new assurance Commissioner, of the processes used by HMRC in settled cases.
  • An enhanced role for HMRC's Audit and Risk Committee in overseeing the department's tax settlement work.
  • Greater transparency, including a new code of governance, for all tax disputes and an annual report on HMRC's tax settlement work.

Greater transparency?

One of the criticisms that was levelled at the previous system was that only one Commissioner, Dave Hartnett, the Permanent Secretary for Tax, had the necessary level of tax expertise to properly scrutinise large settlements such as that reached with the likes of Vodafone and Goldman Sachs and that he was not properly accountable to the other Commissioners.

We therefore look forward to learning who the "tax expert" Commissioners will be and whether they will not only have the necessary level of tax expertise that they will undoubtedly need if they are to be effective in this new and important role, but also be properly accountable for their decision making.

It would be helpful if the new assurance Commissioner was appointed from outside HMRC in order to establish public trust in the impartiality and fairness of the new system and to prevent any repetition of the criticism which was levelled at Mr Hartnett by the Public Accounts Committee.

The devil, as always, will be in the detail of these new arrangements. It is to be hoped that HMRC's new settlement procedure will bring much needed transparency to this important area of tax administration.  There has, in recent years, been a perception that big business has been treated more favourably by HMRC than smaller taxpayers when it comes to resolving tax disputes. It is to be hoped that the new arrangements will go some way to restoring HMRC's badly tarnished reputation amongst the general tax paying public. If HMRC are to close the 'tax gap' it will be necessary for them to win the hearts and minds of the vast majority of taxpayers and this will require greater transparency and consistency of treatment of all taxpayers, both large and small alike!

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