HMRC's tax settlement processes criticised


Tax officials have been criticised by the public spending watchdog for their handling of multimillion-pound tax settlements with major companies.

The National Audit Office said it was concerned about the processes used by HM Revenue and Customs (HMRC) for reaching agreements.

But it found that, in five cases that it asked former High Court tax judge Sir Andrew Park to examine, the settlements were "reasonable" and fair to the public purse.

Sir Andrew was called in by the NAO after MPs on the Public Accounts Committee (PAC) warned that taxpayers' money was at risk from "secret deals" between HMRC and big firms.

In a report, the NAO said the HMRC took decisions which were incompatible with its established settlement strategy and that specialist staff were sometimes excluded from negotiations or did not understand the reasons for settlement.

Amyas Morse, the head of the NAO, said: "On the basis of Sir Andrew Park's reports, I conclude that the settlements reached by HMRC in these five cases were all reasonable.

"Moreover, in settling them, the department successfully resolved multiple, long-outstanding tax issues.

"However, our concerns over the processes by which the settlements were reached have been confirmed.

"It was not appropriate to set up governance arrangements specific to certain cases or to fail to apply processes correctly.

"Poor communication with staff also undermined confidence in the settlements."

PAC chairwoman Margaret Hodge, a Labour MP, said questions remained over why officials "bypassed the proper processes".

"With billions of pounds of tax at stake, it is extremely worrying that the department failed to involve its own specialists in the final negotiations and follow its own rules by settling for less than it could have won in litigation," she said.

"These deals have sent a message that it's one rule for big business and another rule for everyone else."

Mrs Hodge said the PAC wanted officials to commit to "cleaning up their relationship with big business".

An HMRC spokesman said: "We welcome today's report, which confirms that the settlements reached were reasonable and that the overall outcome for the Exchequer was good.

"We have always maintained that the settlements represented good value for the UK, by making sure that large businesses play by the rules in often complex international transactions.

"In February we announced new governance arrangements for significant tax disputes, to provide greater transparency, scrutiny and accountability, and we are currently appointing a new tax assurance commissioner to ensure a clear separation between those who negotiate and approve settlements."