PAC slams Revenue & Customs’ handling of corporation tax bills

The Commons’ Public Accounts Committee said it had ‘serious concerns’ over how R&C dealt with large tax settlements, with governance arrangements either bypassed or overlooked.

In some cases, R&C officials had both negotiated and approved settlements, which the committee said was ‘clearly unacceptable’.

The MPs highlighted a whistleblower’s claims that R&C failed to collect up to £20m in interest from one company.

The PAC report, HM Revenue & Customs 2010/11 Accounts: tax disputes, said the department had ‘made matters worse’ by trying to avoid scrutiny of settlements and consistently failing to give straight answers to the committee’s questions about specific cases. This, the PAC said, had ‘severely hampered’ its ability to hold R&C to account for the settlements reached.

PAC chair Margaret Hodge said that while there was a need for confidentiality to protect individual taxpayers, it should not be used as a ‘cloak’ to protect R&C from scrutiny.

‘It is absurd that we had to rely on the media and the actions of a whistleblower to find out about the details of individual settlements,’ she said. ‘Parliament and the public have legitimate concerns that large companies are being treated more favourably than ordinary taxpayers, whether they be small businesses or hard-working families.

‘The department’s working practices must be seen by the taxpaying public to be absolutely impartial. The impression being given at the moment is quite the opposite, of far too cosy a relationship between R&C and large companies.’

The PAC noted that the department had taken steps to change its governance arrangements, including appointing two new commissioners with tax expertise and planning to introduce independent review of large settlements before they were finalised.

But it said these steps alone would not guarantee proper accountability. It called on the department to ensure it follows its own governance procedures and checks ‘without exception’.

R&C was also urged to ensure it avoided any perception that it was offering preferential treatment to large companies and to instead be seen to be treating every taxpayer equally before the law.

An R&C spokesman said the department rejected the report’s conclusions. ‘The report is based on partial information, inaccurate opinion and some misunderstanding of facts,’ he said, describing R&C’s internal processes as ‘robust’.

He added: ‘We agree that public confidence in our processes is important, and as we have already informed the Public Accounts Committee, we propose to make further improvements to our governance and to increase transparency about our work with large business.

‘We also welcome the further review that the National Audit Office is to carry out as an opportunity to confirm this and clear up the concerns about forgone millions.’