HMRC’s attitude blamed for lengthy & costly tax investigations
HMRC has come under fire over its lengthy tax investigations, inflexible attitude and refusal to back down.
Figures obtained by Pinsent Masons reveal HMRC investigations into large business tax affairs now take nearly three years to settle—an average of 34 months in 2016–17, up from 31 months in 2015–16.
The firm says the increase in time taken for each enquiry is putting pressure on businesses, as these enquiries take up senior management time, increase costs and expose businesses to financial and legal uncertainty.
It also expresses concern that HMRC’s ‘Litigation and Settlement Strategy’ prevents it from settling disputes out of court for anything less than the full amount of tax initially claimed.
Ian Hyde, partner at Pinsent Masons, said: ‘HMRC’s and perhaps more importantly, individual officers’, priority seems at times to be to avoid being seen to be “doing deals” with large corporates.
‘This means HMRC is digging its heels in and not backing down, even when there is a sensible settlement to be reached. Even if HMRC has a weaker case, the Litigation and Settlement Strategy encourages them to give no quarter. Cases are therefore being fought to the end despite growing costs on both sides.’
Miles Dean, managing partner of Milestone International Tax, said: ‘Enquiries are becoming more complex, meaning that more input is needed from scarce specialist staff, including those who deal with overseas tax authorities.
‘This can add months to an investigation, and obtaining answers to queries can take an age. This slowdown is exacerbated further by an atmosphere of heavy governance, as well as the increasing number of inexperienced enquiry staff who will take longer to deal with issues.’
An HMRC spokesperson said: ‘We subject large business to an exceptional level of scrutiny.
At any one time, we will be actively investigating more than half of the UK’s 2,100 largest businesses.The tax affairs of large businesses are incredibly complex, often spanning across many international borders. This complexity means that investigations take time, and the tax at stake means it is vital we make sure that businesses pays what is due.
‘Last year alone, HMRC secured and protected over £8bn in additional tax revenue from the largest and most complex businesses.’
