Global law firm Pinsent Masons warns that proposed tax avoidance rules for large businesses could make HMRC “judge, jury and executioner”

Hayley Kirton
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Pinsent Masons warns the plans give HMRC too much freedom decide what a crucial term means (Source: Getty)

A global law firm has today criticised HM Revenue & Customs’s (HMRC) recently announced plans for cracking down on tax avoidance by businesses, saying that parts of the proposals would make HMRC the “judge, jury and executioner.”

Further details on legislation that would allow the UK tax authority to place large businesses under special measures if they persistently adopted aggressive tax planning methods were published by HMRC on Wednesday.

Organisations under these special measures could find themselves stung with more stringent sanctions for unpaid tax if the amount not paid was avoided through a “speculative interpretation” of the law.

Law firm Pinsent Masons has slammed the plans for giving HMRC too much freedom to decide what a “speculative interpretation” is, with Heather Self, a partner at the firm, remarking: “The new terms effectively leave HMRC as judge, jury and executioner on these businesses’ approach to tax.

“The Revenue has given itself complete discretion to decide what is a ‘speculative’ interpretation of the law by businesses and what isn’t – that is a very subjective judgement and is likely to result in some very contentious penalties when it is used.”

However, with the exception of the potential of HMRC having too much discretion over what counts as a speculative interpretation, Self noted that the proposal did make sense, adding: “It is quite reasonable that HMRC wants to clamp down on large businesses which persistently engage in aggressive tax planning.”

The draft proposals for special measures were one of several documents relating to the draft Finance Bill 2016 released by the UK tax authority on Wednesday. Other papers published included details of further offences for offshore tax evasion, penalties for the general anti-abuse rule and a transparency strategy for large businesses.

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