Tax officials to soften stance on avoidance

HMRC will adopt a less combative approach to resolving tax disputes with businesses in a bid to unlock billions of pounds tied up in court battles.

Dave Hartnett, permanent secretary for tax at HMRC, said there had been examples of officials being too "tough" in disputes over tax assessments.

"HMRC is packed full of very intelligent people, but we are sometimes too black-and-white about the law," he told the Financial Times.

The move, part of a drive for greater efficiency on the part of the cash-strapped department, could produce what Hartnett called a "surge" in revenue over a couple of years, on top of extra money being collected in cases of individual tax evasion.

HMRC has registered over recent months the details of 700 offshore accounts held by UK taxpayers in Liechtenstein following its offer of an amnesty to users of banks in secretive tax havens to hide income.

A greater willingness to settle cases would be welcomed by businesses critical of the Revenue's uncompromising approach to litigation.

However, HMRC said it would not return to old practices of offering "package deals" to multiple tax avoiders, which was blamed for encouraging rampant tax avoidance in the early years of the 1990s.

Hartnett said: "If it is a strong case, we will fight to the death."

Increasingly, inspectors will be asked to reach agreement in cases where there are a range of plausible amounts for tax due as a result of varying legal interpretations. The Revenue is also planning a pilot project to test the use of third-party mediation in a minority of cases.