Avoiding conflict and litigation with hmrc
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The document discusses considerations in planning tax-efficient structures, particularly regarding the perceived aggressiveness and associated risks of HMRC challenges. It outlines the information gathering process by HMRC, how taxpayers should respond, and emphasizes the importance of engagement to resolve conflicts and clarify disputes. Additionally, it details the litigation process and the appeals structure, highlighting the need for careful documentation and adherence to timelines.
Avoiding conflict and litigation with hmrc
- 2. Considerations when planning tax efficient structures › Technical input › Perceived Aggressiveness of the planning › Risk of HMRC challenge Aparna Nathan, Gray's Inn Tax Chambers London 2
- 3. Planning can be regarded as aggressive where: › Off the shelf avoidance schemes are used; › Where the figures involved are large; › Where the difference between a tax charge and no tax charge is: the residence of the trust/ company or the residence and /or domicile of the taxpayer Aparna Nathan, Gray's Inn Tax Chambers London 3
- 4. Risk of challenge increases where: › Income arises or gains accrue to non-UK resident entities Basis of challenge tends to focus on: › 1. is the trust/ company in fact non-UK resident; › 2. possible application of the transfer of assets provisions; › 3. possible application of the settlement provisions or the capital gains tax attribution of gains provisions Aparna Nathan, Gray's Inn Tax Chambers London 4
- 5. First Step for HMRC is information gathering: › In relation to structured avoidance schemes, there will have been a DOTAS notification and scheme users are required to include the DOTAS number in their tax returns. Therefore HMRC is aware of both the scheme and the users. Scheme users should expect to receive information gathering correspondence from HMRC Aparna Nathan, Gray's Inn Tax Chambers London 5
- 6. Where Domicile or Residence is relevant: › Expect to receive a wide ranging request for information relating to all aspects of the taxpayer’s life Need to provide all the information? › The onus is on taxpayer to show that he is resident or domiciled in the chosen territory › Therefore, it is advisable to provide supporting information. Aparna Nathan, Gray's Inn Tax Chambers London 6
- 7. Where offshore structures are concerned, expect to receive the standard Transfer of Assets Questionnaire › This is a document approximately 3 pages long with requests for broad ranging information Aparna Nathan, Gray's Inn Tax Chambers London 7
- 8. Do you need to provide all information requested? › No! › Always check the relevance of the information sought to the tax in issue › It is VERY IMPORTANT to engage with HMRC Aparna Nathan, Gray's Inn Tax Chambers London 8
- 9. This takes several forms including: › Responding to HMRC letters Response should be: Within the agreed timescale; Informative where the information sought is relevant to the tax in issue; or Seeking clarification from HMRC about the relevance of the information sought; › Agreeing to Meetings Go prepared with information; Advisory team should attend. Aparna Nathan, Gray's Inn Tax Chambers London 9
- 10. Information Gathering Stage is important in resolving conflicts: › Builds mutual trust; › Clarifies facts; › Clarifies continued areas of dispute, if any; › Can assist in reaching an amicable settlement so that litigation is avoided. Aparna Nathan, Gray's Inn Tax Chambers London 10
- 11. In the event of litigation: › Early engagement with HMRC will have pinpointed areas of dispute; › Litigation at the Frist tier Tribunal is very important in establishing the facts No new facts can be introduced at the later stages of appeals; › All persons who wish to give evidence must: Provide written Witness Statements; Attend the hearing to be cross examined. Aparna Nathan, Gray's Inn Tax Chambers London 11
- 12. First Tier Tribunal •Appeal on fact and law Upper Tribunal •Appeal on Point of Law only •Need Permission to appeal Court of Appeal •Appeal on Point of Law only •Need Permission to appeal Aparna Nathan, Gray's Inn Tax Chambers London 12
- 13. Appeal to the Supreme Court › Appeal on Point of Law only › Need Permission to appeal › Very rare in practice Aparna Nathan, Gray's Inn Tax Chambers London 13
- 14. Aparna Nathan, Gray's Inn Tax Chambers London 14