Chris Davidson examines the latest report and what it means for settling disputes with HMRC.
The tax assurance commissioner’s latest report contains statistics that confirm what practitioners are seeing when advising clients: it is becoming harder to settle disputes with HMRC. There have been marked reductions both in the number of referrals to governance boards and in the proportion of referrals that are authorised for settlement; the rejection rate has gone up from 23 percent three years ago to 52 percent this year. While HMRC’s success in litigation justifies a tightening of what it is willing to settle for, taxpayers have also moderated their offers. These trends are therefore unexplained, but they mean that taxpayers with disputes need to pitch settlement offers very carefully.
It looks as though the tax assurance commissioner’s latest report, published by HMRC last month, will be Edward Troup’s last. His is the fourth such report and it contains some fascinating detail which throws a light on how HMRC is approaching the task of settling large disputes, especially when viewed as the fourth in a series of reports that plot the development of the role of tax assurance commissioner.
But with Troup now promoted to the executive chair at HMRC, he can no longer say that he is at one remove from the cases that go through HMRC’s governance process, as he used to be able to. He is now directly accountable for all the staff in HMRC that are involved in investigating and settling cases, from the tax officers on the lowest rungs to the director generals. Consequently, HMRC is expecting to appoint someone else to take on the tax assurance commissioner role later this year. This will demonstrate that the assurance role is independent of the line management chain in which the settlements are investigated and discussed with taxpayers, not least because public discomfort at some of the outcomes continues to rumble on.
Having given the process a tick in principle, how is it working in practice? The latest report contains some worrying statistics that bear out what practitioners are seeing when advising clients. In short, it is becoming harder to settle disputes with HMRC. In a recent article for Tax Journal*, Chris Davidson, a director in KPMG’s tax management consulting group, takes a look at the report and what it tells us about settling disputes with HMRC.
* First published in Tax Journal on 5 August 2016. Reproduced with permission.
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