ARC responds to Financial Times article

The FT reports that HMRC will adopt a ‘less combative approach to resolving tax disputes with businesses in a move designed to cut a mounting legal logjam and unlock billions of pounds tied up in court battles over avoidance.’
This doesn’t mean HMRC is going soft on avoidance. Tax Avoidance is not about people using their allowances, or putting savings into an ISA. It’s usually about exploiting tax rules so that you get something for nothing.
Or, to put it in legal speak, “The hall mark of tax avoidance is that the taxpayer reduces his liability to tax without incurring the economic consequences that Parliament intended to be suffered by any taxpayer qualifying for such reduction in his tax liability. The hall mark of tax mitigation, on the other hand, is that the taxpayer takes advantage of a fiscally attractive option afforded to him by the tax legislation, and genuinely suffers the economic consequences that Parliament intended to be suffered by those taking advantage of the option.” (Lord Nolan, Inland Revenue v Willoughby, 10  July 1997).
This new approach means that HMRC will continue to challenge. And ARC wants more resources to allow more staff to take on more challenges – not cuts that reduce the number of staff and the number of challenges. ARC members tackle these sorts of businesses on their facts and apply the appropriate dispute resolution process to settle them and get in the tax, as quickly as possible. They get them to change their ways, that it is not worth trying to avoid. And a recent £1.25bn settlement is surely evidence of how successful they are.
But nobody is perfect and HMRC isn’t always right. Our arguments are not always watertight, and some avoidance can’t be successfully challenged in the Courts. So it’s right to drop things HMRC has no chance of winning as soon as this is clear. This lets our members refocus work on cases where HMRC will win.


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