Yesterday HMRC published an “Policy Paper”: ‘Taxing the profits of companies that are not resident in the UK.’ You can read it here.
It contains this extraordinary assertion:
In effect, say HMRC, if it is “the way that Corporation Tax works” then it is not “avoidance”.
There are a lot of problems with this statement.
The most glaring of them is that it has as its consequence that there is no such thing as tax avoidance. If the structure works it’s not tax avoidance. And if the structure doesn’t work, by definition it doesn’t avoid tax, and so it can’t be tax avoidance either.
Another is that it is contradictory to the definition of avoidance that HMRC itself adopts for the purposes of calculating the Tax Gap.
For this purposes of calculating the Tax Gap, HMRC say (and this time rightly) that even if a structure does deliver a tax reduction it can still be avoidance – “where it serves little or no purpose other than to produce a tax advantage.”
But the most extraordinary thing of all is that HMRC is going out of its way to provide political cover for businesses which engage in abusive tax practice.
Where is the public interest in HMRC saying, publicly, that it is not avoidance for businesses to establish with a view to minimising their tax liability these highly artificial structures?
Why on earth is HMRC acting as public relations agency for Google, or Facebook, or Amazon?Follow @jolyonmaugham