HM Revenue adopts ‘less combative approach’ to tax avoidance

HM Revenue adopts ‘less combative approach’ to tax avoidance

HM Revenue & Customs (HMRC) has announced it intends to change tack in the fight against tax evasion. The Financial Times reports the agency has become embroiled in a “legal logjam” in recent years, with “billions of pounds tied up in court battles over avoidance”.

Signalling the commencement of a “less combative approach”, the permanent secretary for tax at HMRC, Dave Hartnett, told the paper: “HMRC is packed full of very intelligent people, but we are sometimes too black-and-white about the law.” HMRC officials had on occasion been too “tough” in disputes over tax assessments, he added.

The origins of HMRC’s more aggressive litigation strategy can be traced back to the early days of Gordon Brown’s premiership in 2007. Hartnett says the strategy was misunderstood. “I think we got it a bit wrong in the way we explained it to our people. They thought it was a great sword of justice.”

Going forward, HMRC appears to be more willing to settle cases. Evidence of a more conciliatory approach can already be seen in the £1.25bn settlement of a long-running dispute with Vodafone.

Hartnett hopes the new approach will alleviate some pressure on the cash-strapped department and result in a “surge” in revenue over the next couple of years.

He insists, however, that HMRC will not return to the bad old days of offering “package deals” to multiple tax avoiders, which was criticised for encouraging runaway tax evasion during the late 1980s and early 1990s. Hartnett stressed: “If it is a strong case, we will fight to the death.”

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