UK Lagging on Tax Avoidance Investigations

November 26, 2012 Taxation in UK

Tax Bill

LONDON – The UK is not doing enough to address the issue of national taxpayers using overly aggressive tax avoidance schemes.

Last week the UK National Audit Office (NAO) released a new report  on occurrence tax avoidance in the country, showing that the HM Revenue and Customs (HMRC) has not yet implemented effective programs and systems to address overly aggressive tax avoidance schemes utilized by taxpayers.

According to the NAO, the HMRC currently has a backlog of 41 000 cases of aggressive tax avoidance, which could be proven to be inconsistent with tax law if challenged in a court.

However, despite the backlog the HMRC does not currently have any effective procedures in place for dealing with the outstanding cases, as “…while HMRC has a good success rate when it litigates, its investigations can take many years to resolve and it cannot always successfully apply the rulings in lead cases to other cases.”

The report also noted that “…HMRC has an anti-avoidance strategy, but does not monitor its costs and has not yet identified how it will evaluate its effectiveness. This limits its ability to make informed decisions about where to direct its avoidance activity.”

Commenting on the findings in the report, the head of the NAO Amyas Morse said that while the HMRC’s disclosure rules have “…helped to change the market, it has had little impact on the persistent use of highly contrived schemes which deprives the public purse of billions of pounds.”

In response to the report the HMRC has already revealed that it already plans to challenge the legality of one popular tax avoidance scheme, and in the coming weeks will contact participants to offer them an opportunity to straighten out their tax affairs before further investigations are launched.

Photo by Images_of_Money