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HMRC tightens up oversight of large tax settlement deals

HMRC has announced new governance arrangements for disputes over significant amounts of outstanding tax.

The changes include introducing a new assurance commissioner responsible for overseeing large settlements and protecting the interests of taxpayers. They will also reduce the amount of money that needs to be involved before cases are referred to a panel of tax experts to look over.

The move comes in the wake of controversy over deals HMRC has reached with large corporations over tax owed and is a response to a public accounts committee report which slammed one deal with Goldman Sachs as a “rip-off” for the taxpayer.

Treasury exchequer secretary David Gauke says these settlements are an important part of the Revenue’s strategy but that similar moves in other countries have increased tax take.

He says: “These changes will ensure a clearer separation between those who attempt to reach settlements and the commissioners who consider them. This internationally recognised approach has not only led to an increase in tax collected in recent years, it is contributing to the Government’s drive to make the UK more competitive in a global market.”

The new arrangements include:

  • The appointment of a new assurance commissioner responsible for overseeing all large settlements and protecting the interests of taxpayers at large. This commissioner will have no role in any taxpayer’s individual affairs. 
  • New rules which ensure that all cases above £100 million will now be referred, with recommendations from a panel of senior tax professionals, to three tax expert commissioners, one of whom will be the assurance commissioner. At present, a commissioner decision is routinely required for settlements of £250 million or more. This will almost double the number of cases that will be scrutinised by commissioners. 
  • A systematic review programme, overseen by the new assurance commissioner, of the processes used in settled cases covering all our tax settlement work. 
  • An enhanced role for the department’s audit and risk committee in overseeing HMRC’s tax settlement work. This committee is chaired by a non-executive director with relevant experience and includes representation from the National Audit Office.
  • Greater transparency including a new code of governance for all tax disputes and an annual report on HMRC tax settlement work.

In a hearing with Dave Hartnett last October, PAC chair Margaret Hodge said the tax-payer had been “ripped-off” to the tune of £10m as a result of a deal struck between Goldman Sachs and HMRC over outstanding tax liabilities. Treasury select committee member and Conservative MP Jesse Norman called for Hartnett to step down over the deal, condemning the size of penalties placed on small businesses by HMRC for owing tax compared with how the it deals with large corporations.

The committee’s report said investigation of this and other settlement deals has led to “serious concern about systemic problems which must be addressed with the utmost urgency”. It added: “HMRC has made matters worse by trying to avoid scrutiny of these settlements and has consistently failed to give straight answers to our questions about specific cases, which has severely hampered our ability to hold it to account for the settlements reached.”

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