Although I lead a dispute resolution practice, in reality a lot of my time is helping clients remain compliant in a complex environment. For private clients, it’s often about understanding the rules around automatic information exchange on international assets. In the UK alone, we have seen the introduction of 12 year assessment windows, asset-based penalties and new criminal offences linked to under-reporting of income and gains. For companies, it’s a slightly broader conversation around HMRC powers – not only about penalties, information notices and discovery assessments, but also the way in which HMRC is raising those conversations in corporate governance terms, rather than purely as tax compliance issues. For instance, many of the questions asked during penalty negotiations focus on what the review and risk processes were in a business, as well as on the error itself.
Why is tax controversy work such a hot topic at the moment?
The last decade has seen many economic and political changes, and a key consequence has been the automatic exchange of both personal and corporate data between tax authorities. If you combine that with the modernisation programmes that tax authorities are running within their own organisations, the result is not just more investigations (because there is more data to test), but also new types of investigations, often involving a cross-border element. All this is taking place in a climate where tax and reputational risk can make front page news. It is therefore not surprising that both parties in an investigation take the matter very seriously.
What’s your approach to handling tax disputes?
You need to first understand where the tax authority is coming from: why are they concerned, what are their legal powers, and how does that intersect with what happened? Then you need to decide on your own approach to the dispute: what does a good resolution look like to you, and why? How might it evolve as the dispute continues? The reality is that you will keep interacting with that tax authority during the dispute, so it’s important to take into account the need for an ongoing relationship.
I often see disputes that have become entrenched, because there were some initial misunderstandings that have grown over time. That’s why it’s important that taxpayers have a clear idea of what information is needed and what the concerns are from the get go. If it’s clear what the purpose of an enquiry is, it’s easier for people to provide information to HMRC in a timely manner, whilst also reducing the stress surrounding the intent of the investigation or uncertainty about how long the inquiry might last.
Is there a change on the horizon that we should look out for?
Digital innovation is something that tax authorities are looking at with as much interest as the private sector. In some jurisdictions, e-audits are increasingly common; in others, data analytics tools are used to match, store and review large data sets. Some countries like the UK have committed to pre-populating tax returns as far as possible by using third party data streams. This trend is set to continue, and it will fundamentally change how taxpayers and authorities interact.
It will also be interesting to see how the relationships between taxpayers and tax authorities evolve in the next few years as a result of automatic exchange of information. In the medium to long term, more data should lead to fewer misunderstandings. But in the short to medium term, there is a learning curve for all parties to ensure both efficient compliance with the regulations, and to avoid potential misunderstandings that might arise from more data being on the table.
And finally, you might not know this about me but…
My favourite hobby is travelling solo. The nature of my work is highly collaborative, which is something I love, but even extroverts need time alone occasionally.
Although I lead a dispute resolution practice, in reality a lot of my time is helping clients remain compliant in a complex environment. For private clients, it’s often about understanding the rules around automatic information exchange on international assets. In the UK alone, we have seen the introduction of 12 year assessment windows, asset-based penalties and new criminal offences linked to under-reporting of income and gains. For companies, it’s a slightly broader conversation around HMRC powers – not only about penalties, information notices and discovery assessments, but also the way in which HMRC is raising those conversations in corporate governance terms, rather than purely as tax compliance issues. For instance, many of the questions asked during penalty negotiations focus on what the review and risk processes were in a business, as well as on the error itself.
Why is tax controversy work such a hot topic at the moment?
The last decade has seen many economic and political changes, and a key consequence has been the automatic exchange of both personal and corporate data between tax authorities. If you combine that with the modernisation programmes that tax authorities are running within their own organisations, the result is not just more investigations (because there is more data to test), but also new types of investigations, often involving a cross-border element. All this is taking place in a climate where tax and reputational risk can make front page news. It is therefore not surprising that both parties in an investigation take the matter very seriously.
What’s your approach to handling tax disputes?
You need to first understand where the tax authority is coming from: why are they concerned, what are their legal powers, and how does that intersect with what happened? Then you need to decide on your own approach to the dispute: what does a good resolution look like to you, and why? How might it evolve as the dispute continues? The reality is that you will keep interacting with that tax authority during the dispute, so it’s important to take into account the need for an ongoing relationship.
I often see disputes that have become entrenched, because there were some initial misunderstandings that have grown over time. That’s why it’s important that taxpayers have a clear idea of what information is needed and what the concerns are from the get go. If it’s clear what the purpose of an enquiry is, it’s easier for people to provide information to HMRC in a timely manner, whilst also reducing the stress surrounding the intent of the investigation or uncertainty about how long the inquiry might last.
Is there a change on the horizon that we should look out for?
Digital innovation is something that tax authorities are looking at with as much interest as the private sector. In some jurisdictions, e-audits are increasingly common; in others, data analytics tools are used to match, store and review large data sets. Some countries like the UK have committed to pre-populating tax returns as far as possible by using third party data streams. This trend is set to continue, and it will fundamentally change how taxpayers and authorities interact.
It will also be interesting to see how the relationships between taxpayers and tax authorities evolve in the next few years as a result of automatic exchange of information. In the medium to long term, more data should lead to fewer misunderstandings. But in the short to medium term, there is a learning curve for all parties to ensure both efficient compliance with the regulations, and to avoid potential misunderstandings that might arise from more data being on the table.
And finally, you might not know this about me but…
My favourite hobby is travelling solo. The nature of my work is highly collaborative, which is something I love, but even extroverts need time alone occasionally.
