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*Before dealing with this question I should mention that in my experience the vast majority of HMRC staff try to do a good job, are helpful and professional. That they do so against a background of, I suspect, low morale speaks volumes.
But back to the question, I am aware of one leading set of tax barristers who refuse to act for HMRC for this very reason. This is a bold move as many leading QCs and junior barristers act for HMRC on a regular basis (alongside their taxpayer work).
It goes without saying that the tax system is complicated as are many factual situations this clearly results in disputes. Back in the day Inspectors were encouraged ( expected ) to exercise judgement and possibly do a deal to settle a contentious matter. Where both parties know the unwritten rules of the game and hold equally strong cards the system works. Where this is not the case a HMRC enquiry can result in the taxpayer feeling that he has been strong armed and forced to do a deal. Likewise, many promoters of tax planning schemes used to sell their schemes on the basis that when push came to push (typically several years down the line with the tax cash still in the bank) HMRC would ultimately do a deal with 50 pence in the pound being paid.
Press comment on the deals done by certain high profile figures and scrutiny by the Commons Public Accounts Committee resulted in what looks to outsiders as a complete U turn by HMRC.
Inspectors, at all level, are now unwilling to even begin to discuss a compromise or more colloquially a deal and seem to be paranoid about being seen as treating all taxpayers equally. It also led to HMRC formalising and publishing a Litigation and Settlement Strategy (LSS) and a formal code of governance for resolving tax disputes.
Amongst other matters the LSS provides;
We have recently submitted a Freedom of Information Act request to HMRC in an attempt to establish whether HMRC has a policy of pushing taxpayers into litigation and pulling out just before the commencement of the litigation in other words in the hope that a taxpayer will settle rather than face the costs and inherent uncertainty of litigation. HMRC resisted our full request on the basis that it would be too expensive to assemble the figures ( which of course begs the quest as to the extent to which HMRC keeps under review its own compliance with the LSS!).
HMRC did, however, provide some limited information which suggests that over the last three years 20% of appeals were conceded or withdrawn by HMRC at the gates of the court.
During the course of discussions with HMRC it is often a useful tactic to ask HMRC to confirm that their approach is consistent with the LSS – often with interesting results!
So, the question is are these examples of inspectors pushing the boundaries or something more fundamental. Within HMRC a contentious appeal will go through several hands, so it feels like more of a policy.
Of itself is this evidence of lack of morality – no; but as evidence of a mind set and a willingness by HMRC to ignore their own rules it does point towards such a lack. Equally and perhaps of greater concern it does point towards a willingness by HMRC to adopt bully boy tactics. This is just one example of a wider picture which in the round does point towards a “ yes” answer to the initial question.
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