UK | JHA | Joseph Hage Aaronson

HMRC Tax Disputes Taking Over Three Years To Resolve

04 December 2018

Author: Polly Lloyd

Companies are facing greater inconvenience and expense as the duration of HMRC investigations continues to grow. The average time large businesses can now expect inquiries to last is 39 months. The 2016-17 typical time was 34 months, up from 31 months in the previous financial year.

There are a number of possible explanations for this increase. Many businesses and private practice lawyers point to the more aggressive approach being taken by HMRC, including an unwillingness to settle cases and a real lack of resources to manage concurrent large-scale investigations. Some also suggest that having resolved simpler cases and dealt with the “low hanging fruit”, HMRC has now turned its attention to more complex multi-jurisdictional business entities, which necessarily entail longer investigations.

Whatever the cause, the consequences for large businesses remain the same: disruption to financial planning and budgeting and increases in cost, time and resources directed towards cooperating with HMRC. There is also greater risk of potential reputational damage caused by such enquiries, which unless carefully handled, can become public and have a knock-on effect on share price for listed companies.

HMRC’s Large Business Directorate leads investigations into the tax affairs of the UK’s biggest businesses. Its investigations enabled it to secure more than £8bn in additional tax revenue in 2017. It states that “at any one time, we will be actively investigating more than half of the UK’s 2,100 largest businesses.”

More companies are looking to specialist investigations and dispute resolution firms that have strong relations with HMRC to ensure such matters are managed as efficiently as possible and with minimum effect on their business.

JHA’s investigations team is made up of specialist and highly experienced solicitors and barristers, forensic accountants, former regulators and data scientists, uniquely sitting under one roof. JHA is also a leading firm in contentious tax, having achieved Band One rankings in both Legal 500 and Chambers & Partners for the fifth consecutive year.

Data in this article was originally published by the Financial Times.

Return to Listings

Our Insights

An Assessment to Tax is never ‘stale’, but it might be out of date: HMRC v Tooth

This article briefly discusses the key points arising out of the decision of the UK Supreme Court in HMRC v Tooth [2021] UKSC 17. The case considered (1) whether a discovery assessment could become “stale” and (2) the meaning of the phrase “deliberate inaccuracy”.

VATA 1994 s.47, Agency, Onward Supply Relief, & Double Taxation

On 12 July 2021, the First-tier Tribunal (Tax Chamber) (“FTT”) released its decision in Scanwell Logistics (UK) Limited v HMRC [2021] UKFTT 261 (TC), rejecting the taxpayer’s claim for onward supply relief (“OSR”).

Whilst OSR is now limited, post-Brexit, to goods imported into Northern Ireland for onward supply to the EU, the FTT’s discussion of agency under section 47 of the Value Added Tax Act 1994 (“VATA”) is of broader interest.

The case serves as a reminder of the significant financial consequences that can result from errors in tax planning, as Scanwell was ultimately held liable for £5.7 million in unpaid import VAT despite the fact that the imported goods almost immediately left the UK (which, if properly planned, could have meant Scanwell was relieved from liability to import VAT).

Draft Finance Bill 2022—tax avoidance measures

Helen McGhee, senior associate at Joseph Hage Aaronson LLP, considers the draft Finance Bill 2022 clauses published on 20 July 2021 in relation to tax avoidance and recent updates to the tax avoidance regime.

Getting Closer: A Global Minimum Tax on Corporations

On 1 July 2021, US Treasury Secretary Janet Yellen announced that countries representing over 90% of global GDP had agreed to a global minimum tax on corporations (“GMCT”). The GMCT seeks to put a floor on tax competition on corporate income through the introduction of a minimum corporate tax of at least 15%. Whilst certain elements give rise to positive expectations, some caveats should be noted. Much will depend on (1) the outcome of future political negotiations and (2) the detail of the drafting at international and national levels.

The DBKAG & K (CJEU) decision: an opportunity for investment funds?

On 17 June 2021, the European Court decided the joint cases K (C-58/20) and DBKAG (C-59/20) regarding whether the supply of certain services constituted the “management of special investment funds”, benefiting from the VAT exemption enshrined in Article 135(1)(g) of Council Directive 2006/112/EC.

View Our Insights