MPs claim HMRC 'too cosy' with business
Discussion
Deva Link said:
I don't know what you do but with a multi-national, and especially one that's dealing in stuff like wireless telecom which isn't even a physical commodity) it's not always easy to determine where money is made and so where the tax should be paid. Vodafone probably has options about where to declare sections of its profit and will organise things so they pay least tax. These things really aren't black and white.
I thought there are rules regarding consolidations and how oporating companies present balance sheets.If the revenue want to look they can.
Deva Link said:
I don't know what you do but with a multi-national, and especially one that's dealing in stuff like wireless telecom which isn't even a physical commodity) it's not always easy to determine where money is made and so where the tax should be paid. Vodafone probably has options about where to declare sections of its profit and will organise things so they pay least tax. These things really aren't black and white.
They aren't and that my point. The tax authorities werre given massive powers many centuries ago that haven't gone away.The law basically states that the government asks you to pay X and you pay it.
Not that the government wants X you state figure Y and then you all have a cosy dinner and end up paying Z.
If the company states that a certain amount of its money is actually made in Holland then they have to prove that. Not that the HMRC have to prove that.
It is one of the few parts of English law where you are presumed guilty until proved innocent.
The whole point of this thread is that the HMRC seem to have forgotten that they don't work for the benefit of the companies but in fact for the state. And they are much bigger and more powerful than any company and with that comes a responsibility to act fairly but with no fear.
If I am told I have to pay X and I can claim it back if they're wrong then this should apply to Vodawhoever too.
It is however natural that we all try to avoid paying some amount of tax. It shouldn't be that the HMRC are helping our biggest companies do it though.
Mikeyboy said:
The law basically states that the government asks you to pay X and you pay it.
I don't think so. Even with self-assessment you tell the Government how much you're going to pay. You often see questions from people asking if they can claim for various things. Imagine that on a scale where the claims could be hundreds of millions of pounds and no-one is sure what the rules mean.
There are certain organisations and / or individuals that you just never ever want to p
s off.
Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
s off.Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
Mikeyboy said:
Deva Link said:
I don't know what you do but with a multi-national, and especially one that's dealing in stuff like wireless telecom which isn't even a physical commodity) it's not always easy to determine where money is made and so where the tax should be paid. Vodafone probably has options about where to declare sections of its profit and will organise things so they pay least tax. These things really aren't black and white.
They aren't and that my point. The tax authorities werre given massive powers many centuries ago that haven't gone away.The law basically states that the government asks you to pay X and you pay it.
Not that the government wants X you state figure Y and then you all have a cosy dinner and end up paying Z.
If the company states that a certain amount of its money is actually made in Holland then they have to prove that. Not that the HMRC have to prove that.
It is one of the few parts of English law where you are presumed guilty until proved innocent.
The whole point of this thread is that the HMRC seem to have forgotten that they don't work for the benefit of the companies but in fact for the state. And they are much bigger and more powerful than any company and with that comes a responsibility to act fairly but with no fear.
If I am told I have to pay X and I can claim it back if they're wrong then this should apply to Vodawhoever too.
It is however natural that we all try to avoid paying some amount of tax. It shouldn't be that the HMRC are helping our biggest companies do it though.
You actually tell them your liability.
Occasionally there will be differences of opinion as to how a particular rule should be interpreted and this is where the "negotiation" and "settlement" principle comes into play. The larger the organisation, the more likely it will be that technical differences such as this will arise.
F i F said:
There are certain organisations and / or individuals that you just never ever want to ps off.
Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
^This.s off.Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
An earlier poster described the tax inspector as a terrier. Well terriers are born, instinctive killers and can be very dangerous. I'm sure there are dimwits within HMRC, but I have also met some extremely sharp and intelligent tax inspectors.
As FiF says, they and the HSE have enormous powers and it really is not wise to play with them because it is very likely you'll get hurt.
F i F said:
There are certain organisations and / or individuals that you just never ever want to ps off.
Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
That really depends if you have anything to hide. One unfortunate individual I know has been investigated three times in the last 10 years. The last investigation went back the full 7 years allowed and covered most of the period covered in the previous investigations. s off.Customs and Excise being one, the Factory Inspector is another.
I know Elf 'n Safety gets a bad press from time to time, but you really do not want to experience the full powers unleashed. Be warned.
Being rather irritated with the whole thing; he complied fully with their request and provided every invoice, credit note, purchase order as paper copies, they also provided the working calculations made for their tax liabilities.
The paper copies of everything were handed over all mixed up into a large mail sack and in an unsorted random order. All working papers used to calculate liability were also presented. All calculations were performed using the hexadecimal numeral system using reverse polish notation.
The investigation finally concluded that he had actually overpaid tax by about £100 over 7 years.
Eric Mc said:
HMRC very, very rarely simply make up a tax figure they think you should pay and tell you to pay it.
You actually tell them your liability.
Occasionally there will be differences of opinion as to how a particular rule should be interpreted and this is where the "negotiation" and "settlement" principle comes into play. The larger the organisation, the more likely it will be that technical differences such as this will arise.
The fact that they can do that even if very rarely is what I am talking about rather than how commonly they actually do it. You actually tell them your liability.
Occasionally there will be differences of opinion as to how a particular rule should be interpreted and this is where the "negotiation" and "settlement" principle comes into play. The larger the organisation, the more likely it will be that technical differences such as this will arise.
We always think our tax system runs like we want to think it does rather than how it does. Each year the government sets the new tax regime, we either pay it or we get a penalty. We can negotiate all we want but it is as much the law to pay it as to not commit robbery for example. Except as I say with tax code you are presumed guilty at the beginning of your case until YOU prove yourself innocent.
The fact that there are so many things about which they can negotiate is more a fault of the ever more complicated tax code. That htough is a different story
In the same way I can negotiate the tax with my tax office should be no different for Vodawhoever. Complicated sir? But you said your turnover in the UK was this, then we think you owe this, pay it now and prove to me later on what you really think it was"
That doesn't need the head of the HMRC to take the CFO of Vodawhoever to lunch to sort out.
The law is blind I believe. Or have we all forgotten that when it comes to corporations these days because we are scared they will pull out of the UK?
Just because HMRC decides to make a figure up - which they tend to do when the taxpayer is being obstructive or EXTREMELY slow in providing data - does not mean tbhat the made up figure remains the final figure.
They call these "made up" figures "assessments" or "determinations". They can be appealed and usually are. They are often cancelled following the appeal.
The same goes for penalties, fines and interest charges.
They call these "made up" figures "assessments" or "determinations". They can be appealed and usually are. They are often cancelled following the appeal.
The same goes for penalties, fines and interest charges.
Mikeyboy said:
In the same way I can negotiate the tax with my tax office should be no different for Vodawhoever. Complicated sir? But you said your turnover in the UK was this, then we think you owe this, pay it now and prove to me later on what you really think it was"
I'm really not sure where you're coming from with your comments, but you think it would be possible to calculate tax liability from turnover? From the reports I've read, the Select Committee, like you, did seem the most upset about the lack of even-handedness between big business and everyone else. What they didn't acknowledge was the system of having dedicated account managers looking after certain big businesses has been recognised as being pretty successful in bringing in extra money.
Everyone talks about waste in the public sector etc etc, yet when it acts like any private sector business should in focussing on it's most profitable customers, people get upset!
plasticpig said:
Vodaphone's tax bill could have been up to £6billion. There is a quite a bit of gamekeeper turned poacher among the senior ranks of HMRC. Spend 15 to 20 years working up to a senior level at HMRC and then jump ship to the corporate world. HMRC staff often end up negotiating with their ex colleagues.
It was never £6 billion - Private Eye (the only original source) got the wrong end of the stick completely.Vodafone Annual Report 2010 said:
In October 2004, one of our subsidiaries, Vodafone 2, instigated a legal challenge to an enquiry (‘the Vodafone 2 enquiry’) by HMRC with regard to the UK tax treatment of its Luxembourg holding company, Vodafone Investments Luxembourg SARL (‘VIL’), under the CFC Regime. Vodafone 2 argued that the CFC Regime was incompatible with EU law and the Vodafone 2 enquiry ought to be closed.
In September 2006, the European Court of Justice determined in the Cadbury Schweppes case (C-196/04) that the CFC Regime would be incompatible with EU law unless it could be interpreted as applying only to wholly artificial arrangements intended to escape national tax normally payable (‘wholly artificial arrangements’). On 22 May 2009, the Court of Appeal (‘CoA’) held that the CFC Regime could be so interpreted by reading a new exemption into the CFC Regime in respect of subsidiaries which are ‘actually established’ in another EU Member State and carry on ‘genuine economic activities’ there. The CoA ruled that the Vodafone 2 enquiry should be allowed to continue on this basis. The CoA’s decision became final when, on 17 December 2009, the Supreme Court refused Vodafone 2 permission to appeal.
The Vodafone 2 enquiry and other enquiries involving similar holding companies in Luxembourg are ongoing. The outcome of these enquiries, including whether further legal proceedings will be required to ultimately resolve them, is uncertain at this stage. We carried provisions of £2.2 billion (2009: £2.2 billion) in respect of the potential UK corporation tax exposure at 31 March 2010.
In September 2006, the European Court of Justice determined in the Cadbury Schweppes case (C-196/04) that the CFC Regime would be incompatible with EU law unless it could be interpreted as applying only to wholly artificial arrangements intended to escape national tax normally payable (‘wholly artificial arrangements’). On 22 May 2009, the Court of Appeal (‘CoA’) held that the CFC Regime could be so interpreted by reading a new exemption into the CFC Regime in respect of subsidiaries which are ‘actually established’ in another EU Member State and carry on ‘genuine economic activities’ there. The CoA ruled that the Vodafone 2 enquiry should be allowed to continue on this basis. The CoA’s decision became final when, on 17 December 2009, the Supreme Court refused Vodafone 2 permission to appeal.
The Vodafone 2 enquiry and other enquiries involving similar holding companies in Luxembourg are ongoing. The outcome of these enquiries, including whether further legal proceedings will be required to ultimately resolve them, is uncertain at this stage. We carried provisions of £2.2 billion (2009: £2.2 billion) in respect of the potential UK corporation tax exposure at 31 March 2010.
Vodafone Annual Report 2011 said:
On 22 July 2010 the Company settled the Vodafone 2 CFC case with HMRC by agreeing to pay £1.25 billion (comprising £800 million in the 2011 financial year, with the balance to be paid in instalments over the following five years) in respect of all outstanding CFC issues from 2001 to date. It was also agreed that no further UK CFC tax liabilities will arise in the near future under current legislation. Longer term, no CFC liabilities are expected to arise as a consequence of the likely reforms of the CFC regime due to the facts established in this agreement.
To add further information: Vodafone 2 won against HMRC at the Special Commissioners. They won again when HMRC appealed to the High Court. As above, the Court of Appeal judgment can be best described as "maybe, subject to what the European Court of Justice thinks". At this point it was widely thought that Vodafone would likely win again in front of the ECJ. However, the large ongoing provision required as long as the enquiry was active was beginning to cause problems hence their willingness to settle for certainty. Meanwhile HMRC were willing settle out of court because it wasn't just this case at stake - if they lost at the ECJ (a strong probability), they would also lose tax from other companies.Either way it is all academic now - the European Commission said in May this year that our CFC legislation - even the post-Cadbury-Schweppes version - is still incompatible with EU law (specifcally the rights to free establishment and free movement of capital within the EU).
One of my previous jobs involved enforcing legislation 'against businesses' - I worked for a public body.
The simple fact is with small and medium sized business you can 'hound' them because you know where there office is and who is in charge and basically you can pressure them into complying (when they are clearly not complying obviously )because they are 'easy targets'.
Large businesses on the other hand can give you a very tough time if they want to -
they can be difficult to deal with in finding the right people
offices all over the place (UK and abroad)
a complex management structure which makes holding anyone personally liable almost impossible
any fine they do get for non compliane is tiny compared to profit
their legal teams probably have more funds available to them than the entire dept I worked for
to be honest, the only reason they ever did comply was because of a reputational risk of prosecution.
The bottom line is we simply didn't have the time or money to take on the big businesses that didnt want to comply.
Simple fact is, sometimes you have to treat big businesses differently to cosy up to them to try and get them to comply.
Therefore I am not surprised HMRC are friendly with some - that is not to say they should let them break the law. Thinking abotu how complex tax is I daresay it is in HMRCs favour to keep some companies friendly - especially if they want to start playing games and make things long and drawn out.
The simple fact is with small and medium sized business you can 'hound' them because you know where there office is and who is in charge and basically you can pressure them into complying (when they are clearly not complying obviously )because they are 'easy targets'.
Large businesses on the other hand can give you a very tough time if they want to -
they can be difficult to deal with in finding the right people
offices all over the place (UK and abroad)
a complex management structure which makes holding anyone personally liable almost impossible
any fine they do get for non compliane is tiny compared to profit
their legal teams probably have more funds available to them than the entire dept I worked for
to be honest, the only reason they ever did comply was because of a reputational risk of prosecution.
The bottom line is we simply didn't have the time or money to take on the big businesses that didnt want to comply.
Simple fact is, sometimes you have to treat big businesses differently to cosy up to them to try and get them to comply.
Therefore I am not surprised HMRC are friendly with some - that is not to say they should let them break the law. Thinking abotu how complex tax is I daresay it is in HMRCs favour to keep some companies friendly - especially if they want to start playing games and make things long and drawn out.
Deva Link said:
I'm really not sure where you're coming from with your comments, but you think it would be possible to calculate tax liability from turnover? From the reports I've read, the Select Committee, like you, did seem the most upset about the lack of even-handedness between big business and everyone else. What they didn't acknowledge was the system of having dedicated account managers looking after certain big businesses has been recognised as being pretty successful in bringing in extra money.
Everyone talks about waste in the public sector etc etc, yet when it acts like any private sector business should in focussing on it's most profitable customers, people get upset!
I really cannot see how being nice to a CFO is going to help you get more money if you are the tax man.
I am being somewhat literal in some of my posts for effect, but what I am driving at is that it isn't like the nice man at Company X can decide that next month he isn't going to pay tax to HMRC but will in fact go to US IRS instead for his tax paying needs. He's not buying a service, he's obeying the law.
Mikeyboy said:
They aren't and that my point. The tax authorities werre given massive powers many centuries ago that haven't gone away.
The law basically states that the government asks you to pay X and you pay it.
Not that the government wants X you state figure Y and then you all have a cosy dinner and end up paying Z.
If the company states that a certain amount of its money is actually made in Holland then they have to prove that. Not that the HMRC have to prove that.
It is one of the few parts of English law where you are presumed guilty until proved innocent.
The whole point of this thread is that the HMRC seem to have forgotten that they don't work for the benefit of the companies but in fact for the state. And they are much bigger and more powerful than any company and with that comes a responsibility to act fairly but with no fear.
If I am told I have to pay X and I can claim it back if they're wrong then this should apply to Vodawhoever too.
It is however natural that we all try to avoid paying some amount of tax. It shouldn't be that the HMRC are helping our biggest companies do it though.
What you are ignoring is the fact that it is rarely black and white, and the taxpayer does have a right of appeal that goes all the way up to the House of Lords. HM Revenue and Customs may dispute a tax treatment but they still have to prove it, hence why they may accept a settlement if they are on shaky ground (which is what seems to have happened in many instances).The law basically states that the government asks you to pay X and you pay it.
Not that the government wants X you state figure Y and then you all have a cosy dinner and end up paying Z.
If the company states that a certain amount of its money is actually made in Holland then they have to prove that. Not that the HMRC have to prove that.
It is one of the few parts of English law where you are presumed guilty until proved innocent.
The whole point of this thread is that the HMRC seem to have forgotten that they don't work for the benefit of the companies but in fact for the state. And they are much bigger and more powerful than any company and with that comes a responsibility to act fairly but with no fear.
If I am told I have to pay X and I can claim it back if they're wrong then this should apply to Vodawhoever too.
It is however natural that we all try to avoid paying some amount of tax. It shouldn't be that the HMRC are helping our biggest companies do it though.
Whether that is a good deal for the government depends on costs to pursue the case and chances of success
This is not a factor by any means that only affects large corporations.
Settlement (income split between husband and wife) legislation has been taken all the way to the house of lords, as has two recent IR35 cases, both of which were won by the taxpayer.
The commission report about this seems more cheap populism of the UK uncut variety than the standard you would expect.
ringram said:
Benefit of the doubt should always go to business. They are the ones employing all the people after all.
If you hound them, they will close up shop, relocate overseas, or otherwise do something else to avoid the bureaucratic mess and stress. HMRC should be cozy IMO. Cozy, but fair.
to a point I agree actually. The real issue is though that when a company says it will pack its bags and move. I wouldn't be too quick to believe them. If you hound them, they will close up shop, relocate overseas, or otherwise do something else to avoid the bureaucratic mess and stress. HMRC should be cozy IMO. Cozy, but fair.
The hassle of moving even just your headquarters must be far harder than just coming to an agreement.
If you actually physically relocate think of the cost of firing, hiring and then training a whole new set of staff. Let along the reputational damage such a thing can do in what was your home market.
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