Low Hanging Fruit

A survey by Oxford University's Centre for Business Taxation has revealed that just over 25% of businesses feel it is harder to reach agreements with HMRC, due to strict adherence to internal guidelines.

The survey highlighted tensions between businesses and HMRC over internal guidelines for resolving arguments, aka the Litigation and Settlement Strategy (LSS).

Just over 25% of businesses said that, since 2007, it has been harder to settle disputes with HMRC.

Andrew McKenna, partner and head of tax investigations at Smith & Williamson, is of the view that the strategy seems to have hampered inspectors’ abilities to come to an agreement with businesses. He said there was also the possibility that larger businesses were handled by more experienced inspectors, which could affect the outcome.

Mr McKenna is quoted by economia:

“There does seem to be variation in how large and small businesses are treated. 

With smaller businesses, it could be down to the quality of the inspector, or it could just be the case itself.” 

The study also found that 36% of businesses believe the approach from HMRC has changed for the worse, with increased media exposure on the settlement process.

The media and political pressure on HMRC (from both PAC and others) has, according to some businesses, made HMRC less flexible.

The Treasury, unsurprisingly, deny this. As per a spokesperson:

“We adopt a level playing field in our dealings with customers and aim to resolve tax disputes through collaborative working, whatever their size. 

This is clearly laid out in the Litigation and Settlement Strategy, which all HMRC’s case workers follow.”

Given that larger companies have greater resources (time, personnel, money and legal expertise) I suspect that the "low hanging fruit" approach of squeezing SME's is very tempting to HMRC.

Tax does have to be taxing.

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