Tax Director Sarah Stenton speaks to the Tax Journal about recent tax cases that have caught her eye, what’s keeping her busy, changes she would like to make to tax law and her thoughts on future trends in tax litigation.
What’s keeping you busy at work?
Having only just joined Stewarts on 1 April this year to establish a tax investigation practice with my colleague Lisa Vanderheide, the last four months have been spent getting to know my new colleagues and reconnecting with external contacts. For a new business, we are already incredibly busy with a varied portfolio of clients, which includes divorce clients needing tax assistance, a HNWI with a failed tax avoidance scheme (with a potential criminal/COP9 undertone) and a taxpayer with an inheritance tax disclosure to HMRC.
If you could make one change to a tax law or practice, what would it be?
Being ex-HMRC myself, I appreciate that HMRC is unable to take a commercial view on collection of tax. However, the mass-selling of tax avoidance schemes, particularly the film and disguised remuneration schemes, was unprecedented – and I believe that HMRC needs to be more practical in its approach to recouping the tax that (it believes) should have been paid. Many of the investors I help invested in such schemes in the belief they were acceptable tax planning and are now faced with tax, interest and, in some cases, penalties that they simply cannot pay. The added emotional and psychological strain on the most vulnerable taxpayers should not be underestimated. We’ve all heard the moral debate about everyone paying their ‘fair share’, but there comes a point where a line in the sand needs to be drawn and a more pragmatic view taken. A general avoidance settlement opportunity (similar, for example, to the LDF) with some abated terms (particularly on interest and penalties which are simply insurmountable to most investors) would facilitate a more cohesive collection of tax from failed avoidance schemes.
What do you know now that you wish you’d known at the start of your career?
No-one is as perfect as they would have you believe, so you should never compare yourself to others. Our journeys are our own, and that’s what makes us all unique.
Please share a practical tip in your area of expertise.
HMRC is not the enemy, and you need to have a robust but respectful relationship with them to be successful in resolving tax disputes. Collaboration is key in any relationship, and HMRC is no different.
Has a recent tax case caught your eye?
The recent First-tier Tribunal decision in Inverclyde Property Renovation LLP & anor [2019] UKFTT 408 (TC) is particularly interesting as it arguably means that every enquiry HMRC opened into an LLP, where that LLP is found not to be trading with a view to a profit, has not been validly opened nor any closure notice validly issued. HMRC will naturally be nervous as to the wider impact of this decision, particularly as in most scenarios it failed to open s 9A enquiries into the individual partners. However, it is very early days and I expect the position to evolve. Nevertheless, it will be interesting to see how HMRC responds and whether it seeks to introduce legislation to bypass this potential issue.
What do you think will be the next big focus for tax disputes/investigations?
HMRC has already begun to issue ‘nudge letters’ following the information received under the common reporting standard (CRS). Anyone in receipt of such a letter (or without a letter but with a UK tax disclosure issue) will need to carefully consider their position (whether a denial or a disclosure), particularly in view of HMRC’s ‘no holds barred’ approach to undisclosed income and gains. We are seeing an increase in the number of successful prosecutions by HMRC in relation to evasion, and this is unlikely to abate going forwards.
You might not know this about me…
My husband and I recently renovated a derelict Victorian house in London, helped renovate a family property in Spain, and are now building a home in Scotland. My spare time is generally spent reviewing elevations, designing bathrooms and ordering fabric samples – and I love every moment of it.
This interview was first published in Tax Journal, Issue 1454, 30 August 2019. The original can be found here.
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