HMRC continues to win the majority of avoidance cases it takes to court.
Following the release of tax avoidance litigation decisions for 2016/17, [it is clear that] anyone seeking to implement a complex tax avoidance scheme would have to be a confirmed optimist to assume they would win if the case is ultimately litigated.
Furthermore, HMRC can also now rely on the general anti-abuse rule, which applies to transactions from 2013. The first ruling of the GAAR panel was released recently and was unanimously in favour of HMRC.
However, it is worth mentioning that HMRC saw a slight increase in the proportion of cases it lost last year – although, admittedly this was on a low base.
The cases give little clue to current behaviour by taxpayers: all of the direct tax cases relate to facts dating from 2003 to 2009, with the majority at least ten years old before they reach the courts.
Of the decisions reported, there is only one VAT case and that dates back to 1997! The long delay was caused by a need to refer to the CJEU, but shows that VAT avoidance issues are now rare, especially following the leading case of Halifax in 2006. It takes a long time for the ‘tail’ to die out.
The corporation tax cases mainly relate to complex financing transactions, where subsequent legislation make it unlikely that such schemes would be implemented now. Many were devised by professional services firms but few have actually succeeded.
The income tax cases, on the other hand, tend to relate to fundamental questions such as whether an entity was trading, or whether PAYE/NICs should apply to specific arrangements.
Overall, it has to be said that the volume is not high, which suggests that politicians’ regular promises to collect billions more from ‘stamping out avoidance’ are unlikely to collect as much as they would think.
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Tax avoidance litigation decisions in 2016/17
HMRC continues to win the majority of avoidance cases it takes to court.
Following the release of tax avoidance litigation decisions for 2016/17, [it is clear that] anyone seeking to implement a complex tax avoidance scheme would have to be a confirmed optimist to assume they would win if the case is ultimately litigated.
Furthermore, HMRC can also now rely on the general anti-abuse rule, which applies to transactions from 2013. The first ruling of the GAAR panel was released recently and was unanimously in favour of HMRC.
However, it is worth mentioning that HMRC saw a slight increase in the proportion of cases it lost last year – although, admittedly this was on a low base.
The cases give little clue to current behaviour by taxpayers: all of the direct tax cases relate to facts dating from 2003 to 2009, with the majority at least ten years old before they reach the courts.
Of the decisions reported, there is only one VAT case and that dates back to 1997! The long delay was caused by a need to refer to the CJEU, but shows that VAT avoidance issues are now rare, especially following the leading case of Halifax in 2006. It takes a long time for the ‘tail’ to die out.
The corporation tax cases mainly relate to complex financing transactions, where subsequent legislation make it unlikely that such schemes would be implemented now. Many were devised by professional services firms but few have actually succeeded.
The income tax cases, on the other hand, tend to relate to fundamental questions such as whether an entity was trading, or whether PAYE/NICs should apply to specific arrangements.
Overall, it has to be said that the volume is not high, which suggests that politicians’ regular promises to collect billions more from ‘stamping out avoidance’ are unlikely to collect as much as they would think.
