This article is being written by request – apparently from time to time people tell the Tax Insider office that all the effort that goes into offering them tax advice is a waste of time, and Tax Consultants are also unnecessary, because you can simply telephone HM Revenue and Customs (HMRC) and get free advice. However, free advice is not always the best advice...
Making Use of HMRC Services
I am a great believer in getting advice from HMRC in some circumstances – for example, they operate a number of “clearance” services whereby you can set out the details of a proposed transaction for them, and they will tell you the tax consequences they believe will flow from it.
Some of these clearances are enshrined in statute – there are some quite draconian examples of anti-avoidance legislation which can also catch quite innocent commercial transactions, and there is a statutory process for obtaining HMRC’s agreement in advance that they will not wheel out their sledgehammers to crack your innocent commercial nut.
There are also other informal HMRC clearance procedures which can be useful when you are considering a transaction where the tax treatment may turn on a matter of opinion, and it is useful to know HMRC’s opinion in advance.
It is also possible to agree valuations of assets for capital gains tax purposes where these are needed to complete a tax return – much better to have the discussion before you put the return in than to hope for the best and submit it, only to have the same discussion as part of an HMRC “Aspect Enquiry” where the possibility of penalties looms if they consider your valuation was a little sloppy!
I use all these services frequently on behalf of my clients, and they are a great help in providing a better service for them. I could carp on about the delays that are sometimes involved, and the way that in some cases HMRC will use any argument they can to avoid expressing an opinion, but on the whole the service works smoothly.
I suspect, however, that the “help” the punters who contact Tax insider are referring to is the “help” you can get by ringing HMRC up while filling in your tax return, or when confronted by a tax situation that you do not understand. In some cases, no harm will result, and you may even get the right answer, but on the whole I am very nervous about this “Do it yourself” approach to tax.
HMRC’s own policy on giving advice is contained in their “Code of Practice 10”, and the following sentence from that document illustrates a major gap in their service:
“However, we will not help with tax planning, or advise on transactions designed to avoid or reduce the tax charge which might otherwise be expected to arise”.
Fair enough – but I and my fellow tax consultants certainly will give you that advice, and for surprisingly modest fees, considering the savings you may be able to make!
There is a serious point here – HMRC do their best to promote the view that there is a “correct” amount of tax that is due as a result of any particular transaction, whereas in all but the simplest of cases, there are grey areas and the way a transaction is structured can make a big difference to the resulting tax bill.
As Lord Tomlin said in the House of Lords during the case of The Duke of Westminster v The Commissioners of Inland Revenue in 1936 “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it would otherwise be”.
That remains good law and seems to me a sensible way to deal with the State’s demands for ever higher taxes, but don’t expect HMRC to help you!