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Lions and donkeys

June 14, 2012

The National Audit office finally publishes its report on five of HMRC’s settlements with large businesses.  In other words, it looks at some of the cases where HMRC has had bad press for allegedly letting large corporates get away with paying less tax than they should, or without paying interest on the tax they’ve paid late.  Cases which have been brought to NAO’s and Parliament’s attention by whistleblowers.  (And given the way HMRC treats its whistleblowers I’m afraid I’m inclined to give the benefit of the doubt to the whistleblower simply by virtue of them being a whistleblower.)  Cases where there has been serious and legitimate public concern that the relationship between HMRC and its “customers” – or at least its large corporate customers – has perhaps become too cosy.

The NAO found the settlements were “reasonable”.

Let’s think about this for a moment.  Settling a tax dispute can take years – literally years.  Very clever people paid humungous salaries with almost unlimited resources at their disposal, are up against civil servants whose salaries are frozen, whose morale is the lowest in the Civil Service and whose numbers have been cut and are to be cut further.  HMRC is an arm of the State with the law at its disposal, but then proving a case to a court’s satisfaction can be incredibly difficult when you’re not talking about “did person A hit person B” but whether the movement of money happened at all and if it did what the generally accepted accounting provision treatment of it should be and how that relates to the tax legislation.

The NAO found the settlements were “reasonable”.

Not “perfect”.  Not “correct”.  Not “accurate”.  Just “reasonable”.

The executive summary of the NAO report says:

For each of the five settlements, we asked Sir Andrew Park to consider whether:

  • the settlement value was reasonable in view of the circumstances of the case;
  • the settlement was consistent with the Department’s Litigation and Settlement Strategy;
  • the Department obtained appropriate legal advice and acted upon the advice at all relevant stages; and
  • the Department followed its own procedures.

7 In evaluating reasonableness, we have considered whether the settlements represent fair value for the Exchequer and were in the public interest. This included considering whether the settlement was as good as or better than the outcome that might be expected from litigation, considering the risks, uncertainties, costs and timescale of litigation.

Incidentally, I looked for the Litigation and Settlement Strategy – the NAO report helpfully provides a link, but it appears to be broken.  A search of the HMRC site provides lots of commentary about the strategy but not, so far as I can find, a copy of the actual strategy itself.  Hmmm… now where have I heard that before? <coughs making a noise sounding like “customer-centric strategy”>

It’s a depressing thought: HMRC has been cut too far for the mantra that its job was to “collect the right amount of tax; not too much and not too little” to be applicable any more.  Now it’s satisfied with a “reasonable” amount.

Meanwhile, UK uncut took a different view.

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