http://business.timesonline.co.uk/to...cle4692626.ece
HM Revenue & Customs turns to City law firms to catch evadersRobert Watts
HM Revenue & Customs is planning to unleash some of the world’s most expensive lawyers on businesses and individuals suspected of evading tax.
So zealous has the tax authority’s chief, Dave Hartnett, become on taking court action in recent months, that the in-house Revenue Solicitor’s Office has been unable to cope with its workload.
To deal with a backlog of up to 1,000 cases, HMRC is for the first time planning to call in City law firms, whose partners charge up to £1,000 an hour. The policy remains at an early stage but the department has already hired Lovells to act for it in a cross-border tax case later this year.
Last year, HMRC published a new litigation strategy that said it would pursue a zero-tolerance strategy against individuals and businesses who try to dodge tax.
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Previously, the department tended to cut deals with tax evaders, allowing some of them off the full amount owed if they agreed to pay up without a fuss.
Chris Oates, tax risk management partner at Ernst & Young, the accountant, said: “As a result of that policy change, more disputes now end up in court. It’s no surprise that the Revenue’s new litigious line is hitting its resources. The legal department is already under huge pressure and there have been concerns about how it would cope with the increased workload.”
Accountants fear that HMRC’s use of City law firms may prove costly to the public purse, with the Revenue showing itself keen to pursue even relatively minor cases.
Mike Warburton, the senior tax partner at Grant Thornton, said: “There will be City lawyers who will think Christmas has come early. Inspectors have started taking cases on relatively small amounts, regardless of cost and there is the potential for a great deal of taxpayers’ money going off to m’learned friends.”
Those firms likely to win business include the “magic circle” of Slaughter and May, Linklaters, Clifford Chance, Allen & Overy and Freshfields.
HMRC said yesterday: “There is no backlog with litigation. We have a very large litigation practice and we do almost all of it ourselves. As a responsible organisation we have for many years made use of the private sector to handle some of our smaller cases. We are currently experimenting with one of our middle-sized cases by asking a City firm to handle it for us.”
The decision to use more external solicitors has been driven through by Hartnett and Diane Hay, the Revenue’s deputy director of international corporation tax.
The policy has infuriated senior civil servants in the Revenue Solicitor’s Office, who fear their role is being undermined.
Stephen Camm, the partner who leads Price Waterhouse Coopers’s tax investigations practice, said that using external lawyers may speed up the Revenue’s turgid processes.
He said: “HMRC signalled that more tax disputes would be litigated but progress in turning that into reality has seemed painfully slow. Anything that HMRC can do to speed up and give taxpayers certainty earlier is to be welcomed.”
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