Tag Archives: Tax Enquiry

De Silva Decision due on Wednesday 15th, Nov 2017

The De Silva claim against HMRC that was heard at the Supreme Court on June 22nd will receive its judgement on Wednesday Nov 15th.

The LTAG team will carefully review this judgement to determine its implications, especially on those who have made carry back claims, and those who are part of S54 agreements with HMRC. We will also review what the judgement may imply for HMRC’s powers of recovery.

To the best of our knowledge there are no other cases in the High Court, Court of Appeal or Supreme Court diaries relating to HMRC’s powers of recovery.  The LTAG case will therefore be the deciding case in regard of what HMRC needs to lawfully do in order to recover repayments made to taxpayers.

What types of HMRC enquiries are there and how do they affect LTAG membership?

LTAG will claim that HMRC are out of time to recoup repayments made to taxpayers that meet certain criteria.  One of those criteria is that a taxpayers cannot have an open enquiry into their affairs for the relevant tax year that relief was claimed in.

This raises the question as to what is an open enquiry?

HMRC as a matter of course will typically have raised enquiries into all tax solutions and will typically have raised a Section 12AC enquiry to do so.  Often solutions were structured as LLPs.  S 12AC enquiries deem that all partners in the LLP are at the same time under enquiry.  On closure of enquiries into the LLP, typically under S28A, those deemed partners enquiries are settled at the partner level by amendments being issued under s 28B.

For the claim being put forward by LTAG clients have standing to join the action if they received solely a s 12AC enquiry.

If on the other hand they received an enquiry into their own personal affairs under s 9A unless that enquiry has been closed then HMRC are still in time to recoup repayments made to taxpayers.

A little complex but in essence if it was only the taxpayers solution that was enquired into and that solution enquiry is closed then taxpayers can join LTAG.

 

Comments on Tax Avoidance from the UK Commissioner of Income Tax – Edward Troupe

Earlier this week I was fortunate to be able to attend a senior tax specialist’s conference where the Commissioner of Income Tax (HMRC that is) was speaking about their views on dealing with avoidance.

Speaking principally about corporation tax the Commissioner stressed that 90% of tax is paid without intervention but where intervention is required the aim of HMRC is not to get more tax but the tax that is due in accordance with the law. He stressed that HMRC seeks to collaborate to settle disputes and that they see litigation as a failure.

Where HMRC does seek to settle matters their objective is to settle in a manner that is consistent with what they feel a court may have ruled. Of particular importance is their perspective that there needs to be consistency across all taxpayers so it leaves little room for “deals” as may have been the case in the past.

Of interest was the fact that in HMRC there are 17,000 officers and annually there are more than 100,000 settlements. A settlement being where what was originally filed is different to what is finally accepted by HMRC. With this number of settlements HMRC is keen to work with agents who can assist in avoiding disputes in the first place and can assist in settling matters for their clients as is necessary.

The Commissioner made special mention that in prior times the talk was about “avoidance” these days the talk is about “boundary pushing”. He explained this by saying that where an entity has structured itself or created transactions which are beyond a reasonable interpretation of the law then HMRC will come down very hard.

Unlike the experience of the entire audience the Commissioner also stressed that HMRC doesn’t have a strategy of delay or of playing games in settling disputes since HMRC itself doesn’t like uncertainty. Nonetheless he accepted that there have been and continue to be shortages of staff.

To assist with this last week’s Autumn Statement has given the Commissioner something to be pleased about.   The government committed an extra £800m to tackle tax avoidance. In the year 2014/15 an extra £7.3 billion was recovered from UK corporates due to extra compliance. The screws will therefore really be on with the extra funding.

One of the keys to all of this is the need to be continuously on top of UK, OECD and legislation in all of a company’s geographies so as to remain compliant. For the UK it means being very sure about the distinction between “aggressive boundary pushing” (what was aggressive avoidance) and “aggressive planning”.   The Commissioner’s definition of aggressive was – “not what the government intended”.

What all this means is that companies and individuals, even more than before, need to pay particular attention to how they structure their affairs, how they transact in the future and as importantly the ongoing viability of what they have in place today.