Don’t be fooled. HMRC are NOT going soft…

The FT has published an article headlined: Tax officials to soften stance on avoidance. This is being picked up and widely misinterpreted in my opinion.

AccountingWeb asks: Is Dave Hartnett going soft? Elsewhere the FT’s headline has been bastardised as: HMRC goes soft on tax avoidance and: Revenue ‘to go softer’ on tax avoiders. In the latter case at least the difference between avoidance and evasion is not made clear. The implication given is that tax evaders and avoiders will have an easier ride in future. This is misleading to say the least.

The author of the FT piece is the highly regarded Vanessa Houlder (although I suspect the headline was picked by a sub-editor). Let’s see what’s really going on.

I’ll start by picking out a couple of key quote from the article:

The Revenue’s fresh approach is primarily focused on business rather than wealthy individuals.

Mr Hartnett said: “If it is a strong case, we will fight to the death.”

Now let’s go back to the opening paragraphs:

Revenue & Customs will adopt a less combative approach to resolving tax disputes with businesses in a move designed to cut a mounting legal logjam and unlock billions of pounds tied up in court battles over avoidance.

Dave Hartnett, permanent secretary for tax at HMRC, said there had been examples of officials being too “tough” in disputes over tax assessments. “HMRC is packed full of very intelligent people, but we are sometimes too black-and-white about the law,” he told the Financial Times.

I know Dave. The prospect of him going ‘soft’ on ‘abusive’ tax avoidance, whether undertaken by individuals or businesses is as likely as Gordon Brown being invited to join the coalition government.

Bottom line. This is all about a welcome change in the way HMRC approach tax disputes with large corporates. The central themes of the Litigation and Settlement Strategy (LSS), launched in 2007 are:

• Seek non-confrontational solutions where possible.
• Focus on issues that will best serve HMRC’s goal of tax gap reduction.
• Choose cases for their wider impact, as well as for their own value