MPs grill HMRC over accounts and new powers

HMRC’s chief executive, Lin Homer, has told MPs that it will let the National Audit Office check its forecasts for tax collection after it miscalculated figures by £1.9bn a year.

Homer and other HMRC board directors also told MPs on the Public Accounts Committee that new “accelerated payments” powers, which will require those using a listed tax avoidance scheme to pay the dispute tax up-front, will be a “game changer” in countering avoidance.

The committee was discussing HMRC’s latest accounts.

Homer apologised for the error in the figure its performance was judged against but said there was not need to change it’s internal procedures to stop it making a similar error again.

Homer defended the accuracy of HMRC’s estimates for how much tax loss it has prevented (by things such as campaigns to raise public awareness about penalties for tax evasion). Judging HMRC only on the tax it collects is a bit like judging fire services only on fires they put out not fires they prevent, Homer told PAC chair Margaret Hodge.
MPs asked HMRC if they were tough enough on corporate tax avoidance and how it decided whether to go to court or settle out of court.

Jim Harra, HMRC’s director general of business tax, said HMRC won 80% of it’s litigation over tax avoidance. It will go to court it if reckons it will get more tax than if it settles with a taxpayer, he said.

He said he was “disappointed” with an upper-tribunal ruling about Rangers Football Club’s use of employee benefit trusts, which ruled against HMRC.

Accelerated payments powers, which are due to be introduced in the Finance Bill 2014, would be a “game changer” and “change the economics of tax avoidance”, Harra said.

These new powers should mean that HMRC has to go to court less to shut down tax avoidance schemes, saving it time and money.

Some MPs were not satisfied, though.

Hodge asked why it takes HMRC so long to challenge big avoidance schemes in the tribunals.

The Liberty avoidance scheme, for example, which was reportedly used by various celebrities, was promoted in 2005 but probably won’t be challenged in a tax tribunal until the autumn.

Homer admitted that it takes too long in some cases but said accelerated payments powers would help it act quicker.

MPs also asked HMRC about it’s dealings with small and medium-sized businesses.

HMRC said its Time To Pay scheme, which allows small businesses more time to pay tax debts, was working well, as were campaigns to deter tax evas