The turn of public opinion against aggressive tax planning strategies has influenced how cases are being decided on today, says Steven Porter.
The head of tax disputes and investigations at Pinsent Masons says public sentiment has sharply turned against tax avoidance in recent years, which has meant outcomes of ever mounting cases have changed even in the courts.
While cases are heavily reliant on facts, there is always the grey area of interpretation and this can be critical, he says.
"Even relatively recently, like 10 years ago, you could have got a decision from a tribunal which was very like 'you've stuck within the confines of these rules therefore you get the relief'," says Porter. "Now you wouldn't get that I don't think.
"Public sentiment sort of [changed] the output from the courts, particularly the Supreme Court as well, it just influences where they fall on that interpretation piece."
For taxpayers and their advisers this means working effectively with HMRC when a dispute arises is vital to mitigate the potential fallout.
And while advisers might not be on the hook when it comes to their clients' tax disputes with HMRC, as everyone has a responsibility to declare their tax themselves, they could nevertheless face claims coming from their clients for the advice they gave.
"There are a lot of civil claims flying around," says Porter, "so if you're an IFA and were involved in that in the past...perhaps you might have done it with a straight back at the time, you could still be exposed to claims by your clients to try and make them whole for the losses that they've incurred as a consequence of using the scheme that [the adviser] may have recommended."
So it's important advisers understand how tax disputes work and what to do to help clients get the best outcome possible under the circumstances.
No more horse trading
HMRC has a litigation and settlement strategy in place, which basically says the revenue can't agree to anything with a taxpayer unless it's likely that a court or tribunal would find that that situation applied, that tax analysis applied, says Porter.
This means the process is fairly structured and the 'horse trading' of the past no longer applies.
It's all about finding the facts and then applying the law, he says. "That's been quite helpful in establishing the sort of rules of the game for both HMRC and the taxpayer and what realistically HMRC can accept."
But facts can sometimes be sparse, especially when the case is a decade old. That's why it's key to give HMRC context for what's happened, why it happened, says Porter "That sets the parameters really."
"They got in trouble [some time ago] with Goldman Sachs where they had like a sweetheart deal. And then after that it caused HMRC to look internally and sort of self-reflect on what its governance should be, you know, and since then it's been really good to be honest, you don't get that sort of horse trading anymore."
