Of the 26 cases where HMRC considered tax avoidance was involved in 2016/17, 22 were won by the Revenue, three were lost and one had a mixed result.
This is compared to 23 out of 26 cases won in 2015/16, two lost and one mixed, which means the outcome found partially in favour of HMRC.
Heather Self, partner at the law firm Pinsent Masons said, “Anyone seeking to implement a complex tax avoidance scheme would have to be a confirmed optimist to assume they would win if the case is ultimately litigated.”
Self said that all of the direct tax cases resolved in the last year related to facts dating from 2003-09, with the majority at least 10 years old before they reach the courts.
“Of the decisions reported, there is only one VAT case and that dates back to 1997. The long delay was caused by a need to refer to the ECJ, but shows that VAT avoidance issues are now rare, especially following the leading case of Halifax in 2006. It takes a long time for the ‘tail’ to die out,” she explained.
“The corporation tax cases mainly relate to complex financing transactions, where subsequent legislation make it unlikely that such schemes would be implemented now. Many were devised by professional services firms but few have actually succeeded.
“The income tax cases, on the other hand, tend to relate to fundamental questions such as whether an entity was trading, or whether PAYE/NICs should apply to specific arrangements.
“Overall, it has to be said that the volume is not high, which suggests that politicians’ regular promises to collect billions more from ‘stamping out avoidance’ are unlikely to collect as much as they would think.”
Last year, HMRC generated a record compliance yield of £28.9bn as a result of its anti tax avoidance and evasion campaign. This is the equivalent of around a quarter of the UK’s NHS budget, the Revenue said.