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Taxman is applying 'undue pressure' in disputes

'If a financial services business was found to be using a similar tactic, it is likely the FCA would be knocking very firmly on that business's door'

18 September 2015

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HMRC is increasing sending 'nudge' letters directly to taxpayers engaged in a dispute with the authority, instead of the taxpayer's legal or financial representatives.

If this were to happen 'in any other area of litigation [it] would be seen as applying undue pressure', law firm RPC has said.

The tax authority boasts an 80 per cent win rate and often attempts to dissuade tax payers from challenging claims for unpaid tax in much of its correspondence, by encouraging them to settle.

Adam Craggs, partner and head of RPC's tax disputes team, commented: 'HMRC believe that by placing pressure directly on taxpayers engaged in a dispute, they can force them to pull out and settle.'

'They are sending letters about often highly complex issues to individuals who do not have technical knowledge of tax issues. Not only is this a tactic designed to pressurise taxpayers into settling their dispute, it also demonstrates just how far HMRC is prepared to go in its attempt to persuade taxpayers not to pursue their dispute.'

He added: 'If a financial services business was found to be using a similar tactic, it is likely the FCA would be knocking very firmly on that business's door.'

The 'Behavioural Insights Team' that are in charge of the nudge letters attempt to use behavioural psychology to dissuade taxpayers from using any tax avoidance methods, and encouraging them to pay their taxes.

The methods they employ are very simple and innocuous (for example, changing the wording of a sentence to create a feeling of guilt) but when applied systematically, they can be very powerful.

Craggs feels that if HMRC really do have faith in their case, they shouldn't be resorting to underhand tactics.

'If HMRC are confident of their technical arguments, they have nothing to fear from the dispute resolution process and do not need to spend taxpayers' money on behavioural scientists to 'nudge' taxpayers to abandon their appeals.'

 

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Tax & Wealth structuring