HMRC are always cracking down on one thing or another, no surprise since their recent crack-down on companies avoiding tax netted them a whopping £27 billion.

This time it’s company tax avoidance being examined and there’s a suite of new ‘proposals’ to match. It looks like big businesses trying to avoid tax will be put into ‘special measures’, which is government speak for being scrutinised to within an inch of their sad, sorry lives and jumped on for every little sin.

As we write (27th July 2015) the details behind the proposals are due to be announced by HMRC very soon, via a special consultation setting out the plans first announced in the Summer Budget. It looks like the  rules are set to be tightened up for big business, with the government considering a range of policy ideas aimed at halting corporate tax avoidance in its tracks.

The ‘voluntary code of practice’ idea

One idea is for a voluntary Code of Practice, designed to define the standards HMRC expects large businesses to meet. As such it requires businesses to take note of the ‘spirit’ of British tax legislation as well as the law.

While it’s a good idea on the face of it, it also seems a bit naïve since so many companies already seem perfectly happy to work outside the spirit of the law. Isn’t it highly unlikely that appealing to their consciences will change anything?

One thing is clear: it’ll force businesses to discuss anything they feel might be a grey area, of which there are many. Ultimately the initiative, if it bears fruit, could mean companies will be forced to ask HMRC to clarify things. HMRC would then try to figure out what Parliament intended from the law under those circumstances, leaving the businesses concerned bound by HMRC’s decision.

It doesn’t sound too bad until you realise the UK’s tax system is so complex that it’s a nightmare trying to work out what Parliament intended. And many feel it puts HMRC in an uncomfortably powerful position, giving big tax decisions to individuals who are themselves under pressure to generate revenue.

As you can imagine business leaders are up in arms. But some people think that if they can’t police themselves properly, can’t be trusted to pay what they owe, can’t be trusted to act within the spirit of the tax laws, they really don’t have a leg to stand on.

As the email sent by HRMC to tax directors said: 

“These new measures do not represent a fundamental shift for HMRC, but rather a strengthening of our existing strategy. They are specifically designed to discourage large businesses from pursuing aggressive tax planning arrangements, and to provide additional sanctions against the small minority of large businesses that persist in unacceptable behaviours.”

I don’t know about you, but hearing HMRC talk about changing people’s ‘unacceptable behaviours’ is slightly sinister.  How do you feel about the Inland Revenue being given so much more power?