Report advises fairer treatment of tax disputes

Tax compliance and disputes handled by HMRC should be handled with complete impartiality regardless of company size, a Treasury sub-committee report has found.

The recommendation is one of numerous suggestions made by the committee, a group of MPs appointed by the House of Commons to examine HMRC's operating procedure.

The report acknowledged that HMRC's recent treatment of larger companies had been controversial, with some suggestions that it had allowed some clients to pay less tax than was legally due.

It maintained that voluntary tax compliance was the most efficient method of closing the 'tax gap' and that HMRC should deal with big businesses and the smaller tax payer in exactly the same way.

The report also labelled HMRC's calculation of the amount of tax owed by tax payers as 'flawed' and criticised its staff for focusing on maximising revenue rather than getting tax payers to pay the right amount of tax.

Suggestions from the Treasury Committee included:

  • A reduction in the amount of time HMRC devotes to calculating the 'tax gap'.
  • Transparency regarding Treasury and HMRC spending.
  • Further drives to promote voluntary compliance from tax payers who wish to settle tax affairs.

MP George Mudie, sub-committee chairman, said: "HMRC has done some good work in ensuring tax compliance but there is still a long way to go if the tax gap is to be significantly reduced. Taxpayers must have confidence that HMRC is being even-handed at all times, otherwise rates of voluntary compliance with the tax code could suffer.

"It is encouraging that HMRC has recognised that its processes for settling tax disputes were flawed and is implementing changes. However, serious questions remain about accountability and transparency with respect to HMRC's governance, both at Ministerial level and at Board level."