HM Revenue & Customs (HMRC) is about to put new plans forward that could mean firms who try to avoid tax could be put into ‘special measures’ if they don’t follow the “spirit” of tax legislation, not just the letter of the law.
HMRC is about to launch a consultation setting out the details of plans announced by Chancellor George Osborne in his recent Budget, which are aimed at tightening up compliance rules for large businesses.
Mr Osborne’s aim is to crack down on corporate tax avoidance, including a “Voluntary Code of Practice”, which has been devised to define the standards HMRC expects any large firms to meet in their relationship with the taxman.
While everyone wants firms to pay their fair share of tax, there are concerns that such a ‘spirit of the law’ approach could harm UK plc, with some critics describing the Chancellor’s strategy as “risky”.
As one commentator said, the proposals would require firms to approach HMRC about any ‘grey areas’ or uncertainties and the taxman would then decide what Parliament would have intended under the law, thereby binding the business by that decision.
However, since UK tax law is so complex, it is almost impossible to say what Parliament did or did not intend, meaning that firms would no longer be taxed from law but on the basis of a tax official. In addition, it would make the process more cumbersome.
The announcement comes hard on the heels of news that UK Government borrowing fell in June on the back of a record tax haul, as income and corporation tax rose to record levels. According to the Office for National Statistics, (ONS), income tax receipts rose to £11.5bn, while corporation tax raked in £1.7bn, both record monthly highs.