TaxationWeb's Mark McLaughlin thinks HMRC's version of events in tax cases can seem a little at odds with reality.
On the whole, HM Revenue & Customs (HMRC) reporting of tax cases is reasonable, albeit that they often seem to place their own interpretation or 'spin' on events.
However, sometimes HMRC's reporting has a tendency to (excuse the pun) spin out of control in my view.
For example, HMRC recently published a news release 'Tribunal ruling halts charity tax relief abuse' (www.gov.uk/government/news/tribunal-ruling-halts-charity-tax-relief-abuse). It reported that HMRC had "successfully challenged" a tax avoidance scheme. However, in the tax case to which HMRC referred, Green v Revenue & Customs [2014] UKFTT 396 (TC), the taxpayer's appeal was actually allowed (albeit that the taxpayer nevertheless suffered a partial disallowance of the tax relief he had initially claimed).
HMRC's news release goes on to describe the "abuse" in question as follows:
"Under the scheme, shares were listed on the Channel Islands Stock Exchange at a value significantly more than their real worth. The shares were then gifted to charity at the inflated value. The scheme was designed to allow Mr Green to claim tax relief on the amount that the shares had been listed for, rather than on the much lower amount that the shares were worth."
I was interested to know how the shares in question came to have an "inflated value". For example, did the taxpayer place his own value on the shares? No, his shares were actually the subject of a valuation by an expert valuer. Share valuations are not an exact science; I have heard share valuation described as something of a "black art". Two valuers may come up with widely differing valuations on the same shares. The fact that the tax tribunal decided that the valuation relied upon by the taxpayer was too high does not strictly mean that the value was "inflated". The tribunal did not question the valuer's experience in valuing company shares generally, or his independence, and accepted the valuer's evidence as to the valuation methodology used. For HMRC to describe the valuation he arrived at as "inflated" therefore seems rather emotive.
I cannot comment on the 'scheme' in this case, although I have encountered similar arrangements in practice. HMRC apparently took exception to the taxpayer claiming tax relief on his gift of shares to charity on an amount which was significantly higher than the cost of his investment. HMRC alleged that the gift of the shares to charity was part of the pre-arranged scheme to exploit "gift aid" tax relief. However, the only issue for the tribunal in the case was "what was the value of the gifted shares?", not whether the scheme was abusive.
There is a strong public feeling against tax avoidance. The reporting of the above case suggests that HMRC is keen to keep tax 'schemes' in the public eye, and public feeling strongly opposed, for as long as possible.
Best wishes,
Mark McLaughlin
Managing Editor
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