HMRC winning majority of tax avoidance cases

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HM Revenue & Customs lost just three of the 26 tax avoidance cases heard in 2016/17, data from the Government department shows.

A list of litigation decisions that involved tax avoidance on the HMRC website shows that there was also one mixed decision – concerning brewer Greene King – where the outcome was found partially in favour of HMRC.

The three cases it lost concerned Investec, Project Blue, which is a subsidiary of property developer Qatari Diar, and the individuals Salinger and Kirby.

In August last year, HMRC published a consultation paper on strengthening tax avoidance penalties and deterrents. It included IFAs within its proposed definition of a tax avoidance “enabler” because it says they can benefit through fees and commissions by marketing avoidance schemes.

The paper discussed penalties for enablers of tax avoidance schemes, with HMRC favouring a model where a penalty of either 100 per cent of the tax evaded, or £3,000, whichever is higher.

Commenting on the latest HMRC data, partner at law firm Pinsent Masons Heather Self says: “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.”

She adds: “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.”

Self says the corporation tax cases mainly relate to complex financing transactions. Subsequent legislation means it is unlikely such schemes would be implemented now.

Meanwhile, the income tax cases tend to relate to questions around whether an entity was trading, or whether PAYE or NICs should apply to specific arrangements.

Self says: “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.”