'Taxman likes to litigate, even in the face of defeat'
Litigation not settlement is HMRC’s preference even when the tax authority is advised of less than a 50 per cent chance of winning in court, MPs have learnt.
The “unwelcome trend” for the public purse is resulting in an increasing number of tribunal cases, despite HMRC’s own guidance stating that it should concede where success is a slim prospect.
A similarly concerning preference of HMRC's is rooted in another of its internal documents, as the aim of officials is to “maximise revenues due”, the MPs also heard.
Really, the Revenue should be looking to “maximise collection of revenues properly due,” the Chartered Institute of Taxation suggests, in a submission to the Treasury Sub Committee.
The ‘properly’ inclusion is the most telling as CIOT says there are “increasing instances” of HMRC adopting an interpretation of the law which, again, goes against its own best-practice.
In fact, HMRC makes “contradictory arguments” or uses an “inappropriate category of behaviour” to apply penalties in a bid to boost revenues, contrary to its 'right amount of tax’ principle.
“This [approach of HMRC] extends to…ignoring their own published guidance, custom and practice, and relevant case-law,” the institute said.
“Examples of this would be categorising genuine errors as carelessness, or carelessness as dishonesty.”
The ensuing penalties for carelessness in “many” cases seem to be issued with no apparent consideration of suspension, with “poorly thought through” conditions.
There is also the appearance of reluctance on HMRC’ part to suspend penalties for ‘one-off’ errors or -- where it does agree to resolve disputes -- send along the right people.
“The Alternative Dispute Resolution should be promoted more widely,” began CIOT’s President Ray McCann.
“Unfortunately, our members have also experienced cases where the HMRC officers at the ADR meeting did not have the authority to reach a settlement when the taxpayers had senior personnel attending who were able to take decisions that could have led to settlement.”
He believes HMRC’s compliance regime can be improved by simplifying tax legislation, improving the quality of guidance and emphasising the principles in HMRC’s Charter.
The institute also wants to see improved training for HMRC staff, improved practices, processes and record keeping by HMRC, and the reviewing of applicable time limits to more closely align the rights of taxpayers and HMRC to make claims and corrections.