Public AccountsWritten evidence from HM Revenue and Customs

At the hearing on 24 June the Committee asked us about the involvement of Deloitte LLP in the resolution of large tax disputes. In particular, you asked about tax settlements in excess of £50 million during the period from 2006 to the date of Mr Hartnett’s retirement, about the 27 settlements that were reviewed by the National Audit Office in their 2011 report on tax disputes and about the five cases that Sir Andrew Park reviewed for NAO’s report of June 2012.

As I explained in my letter of 25 June, it is not HMRC’s practice to engage the Big Four accountancy firms to act for us in any cases with a taxpayer. A trawl of senior officials involved in large disputes has confirmed that none has any recollection of any case where any of the Big Four were engaged for tax advice to HMRC. The following information therefore refers to situations in which Deloitte or other advisers have acted for the taxpayer in connection with the resolution of disputes.

We do not advise any large companies on what advisor they should use. For much of the day-to-day dealings that the largest corporates have with HMRC, they use in-house tax teams. It is our experience that they use other professional advisers (accountants and solicitors) on tax matters in a flexible way, bringing in different firms to advise on particular aspects of their tax affairs (such as payroll or VAT, for example) or to advise them on particularly complex issues, both at the planning stage and to help them resolve disputes.

These advisers may be present or take a leading role in discussions with HMRC, or they may simply advise the company ‘behind the scenes’ without us being aware of it or having any direct interaction with them. There is therefore no single model. I would also emphasise the fact that most contact and discussion, whether with in-house teams or independent professional firms, is handled by our Customer Relationship Managers (CRMs) and their tax specialists.

To enable us to manage our work, case teams record on our systems the advisers who are currently authorised to deal with HMRC and keep contemporaneous notes in our files of who was involved in particular discussions. However, we have not needed to maintain a central historical record of all agents who have been authorised to act over the period you have asked about. To get that information we would have to ask our CRMs to go back through individual case papers to establish who was acting for the taxpayer at the time in relation to a particular issue.

You asked for information regarding Deloitte’s involvement in settlements over £50 million. Between 2006 and March 2012, 125 issues with value greater than £50 million were resolved in our Large Business Service (Mr Hartnett retired in July 2012). For the reasons I have already explained, the information you requested is not available as it would take very considerable time and effort to try to gather information for all of these issues across the whole period the Committee is interested in.

For the 27 settlements that NAO reviewed in their report on tax disputes of July 2011, we asked CRMs to report whether any professional firm (eg accountancy or law firm) acted on behalf of or advised the customer at the time of settlement. They report that Deloitte acted as advisers to the taxpayer in 8 cases, either alone or in conjunction with other professional advisers.

I cannot give you any more details about the five cases that Sir Andrew Park reviewed, which are included in the 27 mentioned above. In situations like this where small numbers are involved, we are not able to disclose the actual number where this would potentially disclose information in breach of our legal obligation to protect the confidentiality of information relating to HMRC’s customers.

Lin Homer
Chief Executive

4 July 2013

Prepared 8th October 2013