Administration and effectiveness of HMRC – written evidence

Written evidence submitted by Ella Levy

Executive summary

HMRC are entering into settlement agreements with the largest companies which is leading to a huge loss of tax for the Exchequer as well as encouraging aggressive tax avoidance by the multinationals.

Submission

1.      I write to bring to the attention of the Committee a discrete but important point relating to the manner in which Her Majesty's Revenue and Customs (HMRC) have dealt with certain of the larger companies over recent months.

2.      I am a member of the public with a number of friends and contacts amongst the financial community and the public service (including HMRC) and my views reflect, I believe, a widespread unease on this point.

3.      In recent years, HMRC has reached a number of settlements with the large multinational companies in which very substantial amounts of tax have been written off in order to expedite payments to the Exchequer. The most spectacular example is the recent settlement with Vodafone where, despite the potential tax of £6 billion that was being argued over, the actual amounts agreed on were only £1.5 billion.

4.      HMRC has in fact operated, at the instigation of its senior management, a policy of selecting the highest risk companies, i.e. those with a policy of entering into sophisticated tax avoidance arrangements such as Vodafone and "doing deals" with those companies.

5.      Side by side with this, however, HMRC has delivered a consistent public message that such tax avoidance arrangements are no longer acceptable and will be vigorously challenged, if necessary through the specialist Tax Tribunal and the higher courts. This message is, in fact, enshrined in HMRC's Litigation and Settlement Strategy.

6.      It also appears that this strategy is being vigorously enforced against smaller companies and high net worth individuals.

7.      I appreciate that the Exchequer is short of funds and that tax collection is a matter of national priority. However, it does seem to me that writing-off huge sums of tax will simply reward aggressive tax avoidance by our largest companies and penalise taxpayers who may often be less well represented and less able to protect their interests than the multi-nationals.

8.      Overall, I cannot see that HMRC's behaviour in this respect is in the public interest or indeed a lawful way in which to act.

November 2010