According to statistics released by HMRC, between 2016-17 the organisation won 22 out of 26 tax avoidance cases that it took to court. Of the remaining four cases, one had mixed results.
These figures are down on those for 2015-16 when HMRC won 23 of the 26 cases taken to court. The cases that HMRC lost included one over corporation tax, one over inheritance tax and one over stamp duty land tax.
Despite the fall in the number of successes, Heather Self, a partner at Pinsent Masons said, “Anyone seeking to implement a complex tax avoidance scheme would have to be a confirmed optimist to assume they would win if the case is ultimately litigated.”
The GAAR (General Anti-Abuse Rule) which can be applied to transactions as far back as 2013 is a power that HMRC can use to act against tax avoidance in cases where currently there are loopholes. Although the GAAR has been available for some time, HMRC has only recently used it. Self said, “The first ruling of the GAAR panel was released recently and was unanimously in favour of HMRC.”
HMRC publishes a list of tax avoidance cases which gives some idea of what types of activities will attract litigation.
Corporation tax cases typically involve complex finance transactions, and following recent legislation it is unlikely that such schemes would see the light of day today. Most of the schemes were devised by professional services companies and most failed.
Income tax tends to relate to questions such as was an entity trading, or whether NICs/PAYE applies to specific arrangements.
It might appear from the statistics that HMRC is a formidable force, but in reality, the number of cases is low and so the amount collected is not likely to be as high as politicians would like.