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Exaggerated impression of tax avoidance could erode compliance, HMRC officials warn

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HMRC officials have warned that taxpayers’ willingness to ‘play by the rules’ could be eroded if the public got an exaggerated impression of ‘the use of loopholes to avoid tax’, according to the Financial Times.

The FT’s Vanessa Houlder reported that senior officials ‘rejected reports that they had insufficient staff and resources to deal with tax avoidance and said the aggressive schemes receiving widespread public attention did not work under existing rules’.

She quoted an unnamed official as saying: ‘Just [claiming to be] something that isn’t caught by the [proposed general anti-abuse rule] doesn’t mean we won’t use all our anti-avoidance toolkit.’

‘Sinner reformed’

The same report quoted Steve Edge, a Corporate Tax Partner at lawyers Slaughter and May as saying that he supported the proposed GAAR. Edge, who is a member of Tax Journal’s editorial board, was speaking at a conference organised by Oxford University’s Centre for Business Taxation.

Houlder wrote: ‘Describing himself as a “sinner reformed” who was once seen as an enemy of anti-avoidance staff, he said most businesses now had a good relationship with the tax authority. But he said he was shocked by the extent of tax avoidance by individuals, and their lack of good tax advice if they thought certain schemes worked.’

Edge confirmed today that he was referring to ‘abusive’ arrangements of the kind featured in The Times.

He told Tax Journal that the main focus of his talk was on ‘how the sea change that has occurred in the relationship between corporate taxpayers and HMRC and the Treasury over the past five years or so has made the political inevitability of a limited scope GAAR a much more acceptable prospect than it might have been hitherto’.

He added: ‘The tax world has clearly changed for the better and the key now is to make sure that checks and balances are in place to ensure that the GAAR is operated sensibly, and without mission creep.’