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TW Ed wonders if HMRC might have lost the plot when patting itself on the back over the Next Group IBAs case.

Alongside many others, TW is regularly updated by HMRC's press office on tax cases – almost exclusively those which HMRC has won. It is difficult sometimes to reconcile HMRC's much vaunted “taxpayer confidentiality” with many of these cases and we tend to fight shy of “naming and shaming”, although it is not hard to understand that HMRC, rightly or wrongly, perceives a deterrent effect in so doing.

But, at risk of treading on the toes of Mark’s editorial last week, the reporting of one recent case has caused me some concern, because it seems (to me at least) to have gone too far.

For those readers with young children, or who are children (at heart), I suspect it likely that you will have come across Disney’s “The Incredibles”. It is a well-crafted animation, and if you haven’t seen it, you should. While my recommendation as a movie critic clearly has no real merit, there is a (loose!) tax-based reason.

The hero of the movie starts off working at an insurance company. The insurance company is of the ilk which we all dread: it happily takes your money, but the second you make a claim, you are no longer a cherished policyholder but a troublesome claimant, an affront to all right-thinking policyholders and a drain on company profits – a maze of procedures being invoked to ensure that your claim will fail. The art in the movie is how well the caricature is portrayed, such that it seems effortless – and laughable. Suffice it to say that the hero does not tarry over-long there.

In the real world it is not that simple: all insurance companies have to take steps to prevent false or spurious claims. There is probably a spectrum of good and poor quality in this regard, as with most things. There is inevitably a tension between keeping premia low, satisfying policyholders and claimants alike.  But it is the sudden transition from “one of us” to “one of them” which I find... unsettling.

So we move to tax, and HMRC. HMRC has its villains, and takes steps to thwart improper attempts to reduce liabilities and claim refunds. So far, so good. But I take issue with its handling of the Next Group case and its claims for Industrial Buildings Allowance. The language is worryingly similar to that used for nefarious avoiders and evaders, with the headline “Tribunal Tears up Next’s Tax Relief Claim”, and the comment, “This decision safeguards about £2.8 million of revenue.” To which I can ask only, “from whom?”

To be fair to HMRC, the First-Tier and Upper Tribunals both found against the taxpayer. But this was not some “dodgy” tax avoidance case, where HMRC might be justified in celebrating a victory, so as to discourage similar attempts. At first glance, this was a claim by a “genuine” taxpayer, undertaking “genuine” economic activity. The underlying legislation was complex (its abolition will be missed by few) and it is perhaps a rude justification for Next’s position that both judgments were long, detailed and carefully weighed. There was a time when HMRC would effectively “sponsor” a case which addressed a difficult point of tax law, on the basis that a judgment would help everyone better understand how the rules should be applied. It wasn’t so important who won or lost, but what the answer might be.

So why does HMRC crow about winning such a case? Whom is it protecting, and whom does it serve? (I am not sure it is a coincidence that further announcements soon followed re: HMRC's success at raising a further 23.9 billion in tax revenue). Am I supposed to drop any future claims to Capital Allowances – or indeed anything else – just because HMRC disagrees with my interpretation of the law? HMRC publicises the cases it wins but far less the ones it loses. It would be easy to infer that HMRC is less concerned about making sure that people pay the ‘right’ amount of tax and more about raising as much revenue as possible. Pity the poor taxpayer who gets in the way of that.

So, having shunned the insurance game, would our hero work for HMRC? 

Regards all,

TW Ed