We are seeing a considerable increase in criminal investigatory work in a variety of areas. The increased resources (and pressures) placed on HMRC to expand the number of criminal investigations in recent years appears now to be translating into greater levels of defence work. This is only likely to increase as investigations linked to the Criminal Finance Act 2017 lead to prosecutions.
If you could make one change in tax, what would it be?
I would make it mandatory for all existing and new HMRC powers to contain appeal provisions (and increase the resources available to the Courts and Tribunals Service). Those of us who have been working in litigation for some time will have seen the steady erosion of access to justice through chronic underfunding of the justice system and a raft of new powers given to HMRC which contain little or no effective judicial oversight. This has placed considerable pressure on the Admin Division of the High Court, which deals with judicial reviews. More broadly, however, the effect of such powers – whilst attractive to HMRC and governments in the short term – leaves open considerable scope for abuse and overreach, the effect of which, in my view, is likely to diminish trust between the taxpayer and HMRC in the long term.
Are there any new rules or changes in practice that are causing a real problem?
Much has already been written about it but unless there is a change, the loan charge is going to cause a great deal of harm to a great many people. In terms of changes of practice, we have noticed that HMRC is shifting its position on the application of penalties. In particular, we are seeing more cases where HMRC is, at least initially, arguing that a taxpayer has been ‘careless’ in circumstances where they were assisted by advisers throughout. Often this is for the purpose of applying pressure at the initial stages of a dispute, but I expect this will be an area HMRC will seek to litigate in order to broaden the interpretation of ‘carelessness’ in the future.
What should we look out for later this year?
HMRC’s condoc on amending its civil information powers, published last year and currently ‘under discussion’ is something that should cause practitioners (and taxpayers) alarm.
HMRC is already taking a much broader approach to its existing information gathering powers than it has done before. We have seen instances where notices appear to be used as a strategic tool – to exert pressure or create delay – rather than as an information gathering device.
HMRC is more willing than ever before to demand a wider range of documents from accountants and tax advisers (who do not enjoy privilege) and have even taken to questioning claims of privilege when it is asserted, though with less success. I would expect to see more challenges on this.
If enacted, the new rules proposed in the condoc would: (1) remove the requirement for the FTT to approve the issue of a third party notice under Sch 36; (2) prevent the third party from informing the taxpayer that the notice was sent to them; and (3) permit HMRC to use Sch 36 in a wider range of circumstances, such as debt recovery.
(1) and (3) would unacceptably broaden out the existing powers while stripping away the limited judicial oversight which currently exists. Coupled with the effect of (2), the consequences could be devastating to a business or individual, who finds,
for example, that their bank will no longer extend credit or has decided to close their accounts seemingly for no reason. Not only does this proposal tip the balance of power far too far in HMRC’s favour, the potential for unintended consequences is significant.
Finally, you might not know this about me but …
Around 12 months ago, and for the first time in about ten years, I joined a band. We have played four of five gigs since then, and we’ll be at the football club in Chesham Bucks on Friday 21 June 2019, 7pm.
Tax Journal
readers are, of course, welcome to drop by.
We are seeing a considerable increase in criminal investigatory work in a variety of areas. The increased resources (and pressures) placed on HMRC to expand the number of criminal investigations in recent years appears now to be translating into greater levels of defence work. This is only likely to increase as investigations linked to the Criminal Finance Act 2017 lead to prosecutions.
If you could make one change in tax, what would it be?
I would make it mandatory for all existing and new HMRC powers to contain appeal provisions (and increase the resources available to the Courts and Tribunals Service). Those of us who have been working in litigation for some time will have seen the steady erosion of access to justice through chronic underfunding of the justice system and a raft of new powers given to HMRC which contain little or no effective judicial oversight. This has placed considerable pressure on the Admin Division of the High Court, which deals with judicial reviews. More broadly, however, the effect of such powers – whilst attractive to HMRC and governments in the short term – leaves open considerable scope for abuse and overreach, the effect of which, in my view, is likely to diminish trust between the taxpayer and HMRC in the long term.
Are there any new rules or changes in practice that are causing a real problem?
Much has already been written about it but unless there is a change, the loan charge is going to cause a great deal of harm to a great many people. In terms of changes of practice, we have noticed that HMRC is shifting its position on the application of penalties. In particular, we are seeing more cases where HMRC is, at least initially, arguing that a taxpayer has been ‘careless’ in circumstances where they were assisted by advisers throughout. Often this is for the purpose of applying pressure at the initial stages of a dispute, but I expect this will be an area HMRC will seek to litigate in order to broaden the interpretation of ‘carelessness’ in the future.
What should we look out for later this year?
HMRC’s condoc on amending its civil information powers, published last year and currently ‘under discussion’ is something that should cause practitioners (and taxpayers) alarm.
HMRC is already taking a much broader approach to its existing information gathering powers than it has done before. We have seen instances where notices appear to be used as a strategic tool – to exert pressure or create delay – rather than as an information gathering device.
HMRC is more willing than ever before to demand a wider range of documents from accountants and tax advisers (who do not enjoy privilege) and have even taken to questioning claims of privilege when it is asserted, though with less success. I would expect to see more challenges on this.
If enacted, the new rules proposed in the condoc would: (1) remove the requirement for the FTT to approve the issue of a third party notice under Sch 36; (2) prevent the third party from informing the taxpayer that the notice was sent to them; and (3) permit HMRC to use Sch 36 in a wider range of circumstances, such as debt recovery.
(1) and (3) would unacceptably broaden out the existing powers while stripping away the limited judicial oversight which currently exists. Coupled with the effect of (2), the consequences could be devastating to a business or individual, who finds,
for example, that their bank will no longer extend credit or has decided to close their accounts seemingly for no reason. Not only does this proposal tip the balance of power far too far in HMRC’s favour, the potential for unintended consequences is significant.
Finally, you might not know this about me but …
Around 12 months ago, and for the first time in about ten years, I joined a band. We have played four of five gigs since then, and we’ll be at the football club in Chesham Bucks on Friday 21 June 2019, 7pm.
Tax Journal
readers are, of course, welcome to drop by.
