Tax disputes between HM Revenue & Customs (the Department) and large companies are a consequence of the complex and international nature of modern business. Disputes can arise about the facts of a particular case, about the interpretation and application of tax law, and about the legitimacy of tax avoidance schemes. At 31 March 2011, the Department was seeking to resolve over 2,700 issues with the biggest companies, including disputes over outstanding tax, with potential tax at stake of £25.5 billion.
No, there isn\’t £25 billion unpaid.
There is £25 billion that HMRC is claiming should be paid. This is a rather different statement.
For, as numerous court cases over the years have shown (Cadbury about CFC, M&S about foreign losses, M&S again about VAT once wasn\’t it?) what HMRC claims is payable is not always the same as what the law says, ultimately, is payable.
One of the complexities is that EU law trumps domestic as in the CFC rules.
And yes, it is true that where there is a possible conflict in the myriad of laws that govern us we do have access to the courts to try and resolve those conflicts. Whether as individuals or as those associations of people known as companies.
Just to try and make this point more strongly. Before the Cadbury decision the amount claimed by HMRC would have been part of that time period\’s equivalent of that £25 billion. But as we know, that money was not actually payable.
There is not £25 billion of unpaid tax. There is £25 billion in dispute over whether it is payable in tax or not.
To reduce this number you could do any one or all of three things.
1) Simplify tax law so that there are not such disputes. Certainly, more effort should be made to make sure that UK tax law agrees with EU tax law: that latter having primacy.
2) Speed up the legal system. People have been trying this for centuries but the lawyers will have their billing hours.
3) Deny people the right to appeal decisions. This can certainly be done but welcome to the dictatorship.
A handy guide to reading the news reports today. And the usual blogs. Anyone who says there is £25 billion in unpaid corporate tax is lying, ignorant or both.
This is the amount that is in dispute, including amounts being decided upon by the courts system. And as we\’ve seen time and again, what HMRC says is tax due just isn\’t always what the courts say is tax due.