HMRC itself promises to work with customers "promptly and professionally". "It’s everyone’s own responsibility to get their tax right, but we’re here to help," it says on its website.
Lowering penalties
When it comes to penalties, "there's no carrots left, it's all stick," says Porter. At the same time, "it's all behaviour based, so if you've been really naughty, you get the highest penalty [but] you can mitigate that down if you cooperate effectively."
In an unprompted disclosure, where the taxpayer approaches HMRC, this might even be mitigated down to zero.
Though this doesn't mean everyone should approach HMRC as a precaution. "If you took reasonable care on your tax affairs, then there can be no penalties applied to it," says Porter.
There are long stops in place for both fraud and tax avoidance. But Porter says tax schemes, especially historic ones, are complicated, "and we've had a raft of case law come in as well, which confirms there's a broad principle that tax avoidance schemes don't work."
For him, if it's a marketed tax avoidance scheme it's not worth considering at all, because it will be subject to a lot of scrutiny from HMRC "and they have a really good track record of defeating marketing tax avoidance schemes.
"But there's a difference to legitimate tax planning and there is a recognition of the fact that tax is complicated and there's sometimes a grey space. People do plan their affairs to pay the lowest amount of tax, but you've got to judge that threshold just right."
HMRC seems to confirm this. It says: "While we don’t have a problem with tax planning that is within the intent of the legislation, we won’t hesitate to act against contrived arrangements that seek to artificially minimise tax liabilities, whether it’s multinationals diverting profits out of the UK or tax avoidance schemes used by individuals.
"We’re increasingly focusing on measures to tackle issues at source, including focusing on the small minority of tax advisers who make money by promoting tax avoidance and even enabling fraud."
HMRC has dedicated teams which are responsible for certain themes and can detect risk and approach people that way. There's also a fraud team with dedicated themes and dedicated approaches to these. In both cases HMRC would typically begin its investigation by sending people nudge letters.
When such a letter comes it should not be ignored. Clients and their advisers "need to cooperate with HMRC effectively, because the more they tell, help and give information, you can lower the penalties that apply effectively."
