The Public Accounts Committee (PAC) recently issued a report which was scathing about HMRC's relationship with big business, its refusal to divulge information to the Committee, and lack of accountability.

Although there does appear ultimately to be some accountability: it can be no coincidence that Mr. Hartnett's retirement was announced just days beforehand. It seems that Mr. Hartnett's involvement with certain "large business settlements" will be subjected to even greater scrutiny, with the National Audit Office reportedly set to examine up to 10 such deals.

Whilst the main report can be found at Public Accounts Committee - 61st Report, the "highlights" are as follows:

1. The Department's refusal to disclose taxpayer information prevents proper scrutiny of the process for reaching tax settlements with large companies.
2. The evidence of the Department's senior officials fails to give us [the Committee] any confidence in the way large settlements are reached. 
3. The Department chose to depart from normal governance procedures in several cases, which allowed Commissioners to sign off on settlements that they themselves negotiated.
4. Governance procedures have lacked the independence and transparency needed to provide sufficient assurance to Parliament.
5. The Department's failure to comply with its own processes resulted in a substantial amount of money being lost to the Exchequer.
6. Those at the top of the Department have not taken personal responsibility for serious errors. 
7. The Department has left itself open to suspicion that its relationships with large companies are too cosy.
8. The Department is not being even handed in its treatment of taxpayers.

This no doubt makes extremely uncomfortable reading for HMRC but it has to be said that Mr. Hartnett made no secret of his approach to litigation and settlements with big business - see HMRC Offers Settlement Deal for EBTs - "Disguised Remuneration". The perception is that by improving the level of service to / channels of communication with large businesses, HMRC has made it easier for those businesses to pay their tax. (Or not to pay their tax, some might argue). And at a point where the UK needs to raise as much revenue as possible, it is also understandable that negotiating a settlement quickly could be seen in a positive light if the alternative is expensive and protracted litigation through the tax tribunals and/or courts - perhaps with some uncomfortable truths about inadequately-drafted law to be discovered in the end.

It has apparently been claimed on David Cameron's behalf that he supports HMRC and that he believes they have been fair to all. This may well prove to have been ill-judged by reference to the public mood. The government of the day undoubtedly recognises that it must try to make the UK a favourable destination for global businesses. But there must also be a recognition that, whilst a relative handful of its "customers" pay the lion's share of tax revenues, the vast majority of HMRC's "customers" are small businesses, small companies, and 'ordinary' taxpayers; and this is a democracy. 

However, unfortunately for HMRC and particularly for some of the parties involved, the headlines arguably suggest that HMRC may have thrown in their hand far too quickly and easily - even wrongly, it appears in one case, by giving up interest that was due.

It remains to be seen whether or not smaller businesses will benefit from the "friendlier" HMRC of big business - or perhaps big business will now 'enjoy' the same HMRC as everyone else. The "large business model" has hitherto been championed as a great success. But rather than rolling out the positives across the range of HMRC services - and to all its "customers" - the fear for all taxpayers and agents must now be that HMRC will decide it must not be seen to negotiate with any "customer" of whatever size. In other words, that HMRC might bounce from one extreme to the other. Anyone with experience of dealing with the tax authority in enquiries will be all too aware that negotiation is a fundamental aspect of that process. A demonstrably even hand across the board is what is really required - as mentioned in the above report. 

Following on from the article HMRC Targeted Campaigns Move On to VAT, the deadline for completing the Registration phase is 31 December. 

In July this year, HMRC launched its VAT Initiative in which rule-breakers were offered a special plan to put right their tax affairs. The chance to participate, and be guaranteed the conditions contained in the plan, ended on 30 September. 

Under the terms of the VAT Initiative, those who have notified their intention to take part must register for VAT by 31 December 2011. They will then receive their VAT registration number and instructions on how to complete their first VAT return. Once this has been submitted most will face a lower penalty rate of 10 per cent (or potentially even less) on the VAT that has been paid late. 

Since the opportunity ended, HMRC has been identifying those who did not come forward. Substantially higher penalties and even criminal prosecution could follow.

The VAT Initiative campaign focuses on businesses trading above the VAT registration threshold – for this year, an annual turnover of more than £73,000 – but who have not registered for VAT with HMRC.

As per TaxationWeb's previous article, Reminder VAT "Amnesty" Disclosure Deadline 30 September - Which Industries are being Targeted?  the trades affected include:

• construction
• business services
• hair and beauty
• hotels and catering
• retail distribution
• recreational services
•  motor vehicle distribution and repair
• sanitary and domestic services
• agriculture and horticulture
• property and
• road haulage. 

Marian Wilson, HMRC’s Head of Campaigns, said:

 “Those who have told us of their intention to disclose now have until the end of December to register for VAT. They must then submit their first VAT return and make arrangements to pay.

We are determined to ensure everyone pays their fair share and, since September, have begun identifying people and companies who we believe are trading above the VAT threshold but have not come forward. We will be targeting these groups early in the New Year.

I urge anyone with unpaid tax to use it to come forward and avoid potentially lengthy and costly investigations. The penalty they will pay will still be lower than when HMRC catches up with them.”

 You can let HMRC know of your intention to make a tax disclosure by contacting the department on 0845 600 5217, where a dedicated team is available to provide information and advice.

 Those coming forward are also invited to disclose any other tax arrears. Where they have to pay a penalty on undeclared tax other than VAT, this will be lower than the usual penalty of up to 100 per cent of the tax owed charged on those who fall outside this opportunity.

Although it is now too late to obtain the VAT Initiative terms, if businesses do still need to register for VAT, but didn’t make a notification, it may still be beneficial to do so before the VAT Initiative ends, as the penalty paid will still be lower than if HMRC approaches them first.

Businesses needing help can call HMRC on 0845 600 5217. Lines are open Monday to Friday, 8.00am to 4.00pm.