HMRC needs to engage advisers more actively in its approach to tax investigations of wealthy UK taxpayers according to Edwin Coe’s Head of Tax Frank Strachan.
Speaking at the second eprivateclient Annual Law Firms Dinner at the Goring Hotel in London this week, Mr Strachan said a return to how HMRC operated in the past was required to reverse the current disconnect it has with the private client sector.
Mr Strachan described how when he commenced his career in tax at HMRC the relationship between HMRC and the profession was more locally interactive than it is now.
Mr Strachan commented that “HMRC’s role is to collect the correct amount of tax, not necessarily the amount of tax that they might feel to be due.”
Mr Strachan explained that when he worked at HMRC it knew which tax firms and which law firms HMRC could work with and those who were either seeking to fight for the sake of fighting or were simply not fit for purpose.
With the risk based approach to investigations HMRC now employs, whilst cutting the cost of staffing, HMRC has lost the interaction and the knowledge of the local office tax inspector and that investigations now are commenced without any real knowledge of the business or the person in to whom HMRC are investigating.
Whilst acknowledging that the risk profiling is immeasurably better than the hit and miss approach employed when he worked in HMRC, Mr Strachan felt that the connection had been lost along the way.
For professional advisers this means that they need to spend time not just managing the client but also educating HMRC about the client and the history to the client and/or their business.
Mr Strachan said HMRC had a close connection to the professional advisors back then which meant that in many cases settlement was reached faster.
Mr Strachan said that this sort of interaction with HMRC is now impossible as cases are allocated randomly to inspectors from a central register.
“This is not about getting favourable treatment for clients. The randomness of the system is deeply worrying,” he said, “It is about HMRC understanding not only the client but also the professional adviser and understanding that not all of us are peddling tax schemes. The private client profession is in many cases the first line of defence who are active in stopping clients from entering such schemes.”
HMRC should understand that most professionals are not the ‘source of the infection’ as HMRC term them to be.
Mr Strachan added that HMRC could learn a lot from meaningful dialogue with the industry and “see what it is like on the other side of the fence.”
Mr Strachan felt that the changes to taxation of non-doms was an example of poor interaction with the profession. Many long term residents are keen to receive advice but will have to wait until 5 December for the formal guidance to find out the details of changes to which for many will completely change their lives.
“There is huge pressure being placed upon private client advisers to provide clients with advice, but four months is wildly insufficient,” Mr Strachan said.
“I wish HMRC would listen to the sector and engage with it,” he concluded.
Of the Annual Dinner, Frank also commented: “To be able to address such an important audience as were gathered for eprivateclients Annual Law dinner was a huge honour for me.”
This article first published by eprivateclient.