HMRC accused of cosy relationship with firms by PAC

HMRC accused of cosy relationship with firms by PAC


MPs have warned about the dangers of the "cosy" relationship between
accountancy firms and staff seconded to the Treasury to help companies and
wealthy individuals avoid paying tax.








The committee warned that HM
Revenue & Customs (HMRC) was engaged in a "battle it cannot win"
Photo:
ALAMY





8:36AM BST 26 Apr 2013




The Commons Public Accounts Committee said it was "very concerned" at the way
the "big four" firms - Deloitte, Ernst and Young, KPMG, and PwC - were able to
exploit loopholes in the tax laws, using "insider knowledge" from staff seconded
to the Treasury to help people avoid taxes.


Committee chairman Margaret Hodge said the practice represented a "ridiculous
conflict of interest" which should be banned.


"The large accountancy firms are in a powerful position in the tax world and
have an unhealthily cosy relationship with government," she said.


The committee warned that HM Revenue & Customs (HMRC) was engaged in a
"battle it cannot win" in seeking to stem the losses to the Exchequer from tax
avoidance.


It had far fewer resources than the big four firms which employed almost
9,000 staff and earned £2 billion a year from their tax work in the UK.




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The committee particularly highlighted the way the firms seconded staff to
the Treasury to advise on technical issues in the drafting of legislation only
for the individuals concerned to return to advise clients on how to use those
laws to avoid tax.

"Through their work in advising government on changes to legislation they
have a detailed knowledge of UK tax law, and the insight to identify loopholes
in new legislation quickly," it said.

It gave the example of KPMG whose staff advised on the development of
"controlled foreign company" and "patent box" rules, and then issued marketing
brochures highlighting the role they had played.

The brochure "Patent Box: what's in it for you" had, it said, suggested the
legislation represented a business opportunity to reduce UK tax and that KPMG
could help clients in the "preparation of defendable expense allocation".

The committee said it was "inappropriate" for individuals from firms to
advise on tax law and then devise ways to avoid the tax.

"We have seen what look like cases of poacher, turned gamekeeper, turned
poacher again, whereby individuals who advise government go back to their firms
and advise their clients on how they can use those laws to reduce the amount of
tax they pay," it said.

"We are ... very concerned by the way that the four firms appear to use their
insider knowledge of legislation to sell clients advice on how to use those
rules to pay less tax."

While the firms insisted they no longer sold the "very aggressive" avoidance
schemes on offer 10 years ago, the committee said they had simply moved on to
offering other forms of tax avoidance advice.

It said they still offered schemes with as little as a 50% chance of
succeeding if challenged - suggesting a willingness to take advantage of HMRC's
need to weigh the risks of becoming involved in protracted legal battles.

Margaret Hodge is very good and the Government could do with more Ministers like her.

Apparently KPMG were advising Clients on their Tax positions based on meetings their Employees had with the Treasury.