Lee Ellis, Victor Cramer, David Pickstone and Cristiana Bulbuc have drafted the United Kingdom chapter of the Ninth Edition of the Tax Disputes and Litigation Review, recently published by The Law Reviews. The book gives information on tax disputes across 22 jurisdictions.
The conclusion to the UK chapter can be found below. The introduction can be found here.
Outlook and conclusions
The year 2021 is likely to be a difficult year for HMRC, with the twin challenges of the economic impact of the Covid-19 pandemic and Brexit. While HMRC appears to have coped relatively well with the demands made of it in 2020, it will face materially increasing pressure to raise revenue in challenging economic circumstances. In the short to medium term, a combination of pressure from the Treasury and the complications and lack of clarity arising from Brexit are likely to lead to increased focus on compliance activity, and a continued drive to collect taxes from historic tax avoidance.
The UK’s Tax Tribunal system is independent and can be robust, and HMRC generally conducts disputes in a fair and reasonable manner. Timescales may be extended and attitudes may harden, but HMRC’s mantra of collecting the right tax at the right time is ingrained. Where it is persuaded by negotiation or by tribunal and court decisions that the taxpayer’s position is correct, it will largely respect the outcome and act accordingly. There are, of course, exceptions and the Treasury has in recent years resorted to introducing legislation to counteract the effect of court or tribunal decisions it considers to be unacceptable.
The Treasury has also been willing, in limited circumstances, to introduce legislation that has retrospective effect, though this will almost always be restricted to circumstances where retrospective action is considered necessary to address unacceptable tax avoidance, and will be subject to detailed scrutiny by Parliament.
Examples of more aggressive Treasury legislation in recent years have been seen in the context of employment remuneration tax avoidance (the controversial ‘loan charge’) and the accelerated payment notice and follower notice legislation described above. It may be that the Treasury, buoyed by a government that has demonstrated a willingness to push previously established boundaries, may seek to introduce more aggressive measures after the transitional period for the UK’s departure from the EU has ended.
Regardless of oversight from the European courts, we would expect the government to abide by principles set out in various parliamentary statements over the years. These have most recently been codified in a ‘Protocol on unscheduled announcements of changes in tax law’ issued in 2010. These restrict the use of retrospective legislation to targeted tax avoidance measures that should be identified in advance. Where such tax avoidance is identified, the UK has a track record of retrospective legislation aimed at making it ineffective. That is likely to continue.
The full UK chapter of the Tax Disputes and Litigation Review Ninth Edition, can be accessed here.
The Tax Disputes and Litigation Review Ninth Edition, can be accessed in full here.
Reproduced with permission from Law Business Research Ltd
This article was first published in March 2021
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