HMRC's colossal liabilities will only get bigger

18 August 2015

George Bull 

The prospect that HMRC might, on a worst-case estimate, have to repay taxes (and presumably interest) of £42bn has emerged from a recent report by the Office for Budget Responsibility. While an official spokesperson from HMRC professes not to recognise the figures, there is every chance that the picture will only get worse.

The prospect that HMRC might, on a worst-case estimate, have to repay taxes (and presumably interest) of £42bn has emerged from a recent report by the Office for Budget Responsibility.

Statements by HMRC to the effect that the true amount will be nothing like this figure fly in the face of the sober language of the OBR report and the realisation that – so far, at any rate – a large proportion of the total seems to relate to business taxation (such as the Littlewoods VAT decision reported in RSM's Weekly Tax Brief on 8th May 2014 and 7th May 2015). While an official spokesman for HMRC professes not to recognise these figures, one thing is certain: the picture will only get worse.

So far as RSM understands it, the figures exclude payments currently being made by taxpayers in response to advance payment notices (APNs) under which those who have participated in tax avoidance schemes must pay the tax upfront and then argue with HMRC as to whether the scheme is effective through the courts.

If, as HMRC asserts, it wins 80 per cent of the cases which go to Tribunal, then it’s reasonable to assume that 20 per cent of the amount collected under APNs will ultimately be refunded to taxpayers.

Cash is king, especially in government accounting, so we can be sure that the Treasury will be glad to have access to these monies until they have to be refunded. It’s a sobering thought, however, that the figures in question far exceed HMRC’s own estimate of the tax gap.