If you can get into the FT story linked in this tweet it's worth it, and free reads are allowed on the FT:
In 2012, HMRC gave General Electric a trophy for being a good tax citizen of the UK. Now, it's suing it over a $1bn alleged fraud.
Here's my dive into the tax scheme that fooled HMRC and that raises awkward questions for PwC...https://t.co/A9E0w7yMsm
— Tabby Kinder (@Tabby_Kinder) August 4, 2020
I have to be open and say that over the years I have got to know some of the people named in this story: as a tax campaigner our paths crossed, often. For that reason, and because of the gravity of the claim, I am not commenting in detail. But I do have three general comments.
First, this was in the ‘Wild West' days of 2005 when tax campaigning was in its very early days and adverse publicity for tax planning was unknown. It's important to remember how much has changed since then, largely due to that campaigning and the resulting publicity.
Second, tax justice was never rewarded by HMRC for its work on this. The question as to why that did not happen is relevant.
Third, the allegation of fraud is serious - and opens a risk for HMRC itself which I presume it has calculated to be worth taking.
Progress on this case will be worth following. It could define the future of the tax profession for a long time to come.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
It seems a little odd for the FT (a UK newspaper) to be reporting that HMRC (the UK tax authority) is demanding $1bn in taxes from GE (presumably from its parts taxable in the UK ) – they’ll want sterling, surely?
Certainly some transactions were done in 2005 that were unashamedly tax motivated and that would not be done now, for a variety of reasons, but 2005 was already not quite so much like the Wild West as the 1990s. The direction of travel away from more “structured” (that is, artificial) tax planning has been clear for many years, and the House of Lords decisions in BMBF and SPI in late 2004 underlined that the facts should be considered realistically, and the law construed purposively. That formulation of the Ramsay principle seems to be thoroughly entrenched now, and gives judges quite enough latitude to strike done any tax planning that they don’t like, without bothering with the GAAR and other more targeted anti-avoidance rules.
As you say, HMRC would not usually make an allegation of fraud lightly, certainly not against a high-profile business like this. This case must have gone quite a long way up the chain of command for approval. It will be fascinating to see how this plays out.
Agreed
And I am not quite sure that the Wild Werst was over in 2005 as you claim – but that’s a minor point
There was a hang over – the film schemes, for example, which started earlier and ran a bit later – and you’ll always find a hard core of taxpayers willing to take aggressive positions if they think they might get away with it, and dodgy people selling dreams to others who want to believe them (“liberating” pensions for example) but I would suggest the writing was on the wall by 2005. As another marker, DOTAS was introduced in 2004.
I remember meeting the Treasury on DOTAS at the time
It has been a disaster – by being used to restrict the definition of avoidance
Good idea that has gone wrong
We live in hope of a sensible win for HMRC.
But expect a damp squib.