HMRC is desperate to get money into the government’s coffers and some tax experts expect the Revenue to embrace negotiated settlements rather than litigation in a bid to achieve this.

Abbey Tax Protection, an insurance provider for tax customers, says that HMRC have been told to change their tactics and use their discretion in order to speed up case settlement times. Even if the taxman believes he has a really strong case, a lengthy court case is not necessarily going to be the answer.

A spokesman from Abbey said that HMRC is under pressure to settle cases that have been outstanding for a long time and additionally tax inspectors will be urged to pursue more aspect cases which can be settled quickly in order to optimise the current fiscal year’s tax yield.

The tax profession is split in its opinion of the effects of this change in stance. An adviser from Mercer & Hole expressed concern, whilst a tax partner at Grant Thornton welcomed the fact that expensive, time-consuming legislation could be avoided. He said that the Revenue used to have a very strict set of rules regarding litigation, but now it seems as if the decision is left up to the discretion of the tax inspector.

Tax investigations are likely to be at the forefront of the Revenue’s activities for some time to come. The UK tax gap is currently estimated to be around £40bn.

HMRC confirmed that it is committed to reducing the tax gap by 10% in this financial year and they hope to achieve the reduction by discussion and consensus.

Meanwhile, the insolvency trade body R3 is encouraging business owners to keep a tight watch on their financial situation. A recent report suggests that almost 40% of businesses that fail could be saved if the owners had sought expert advice at the earliest opportunity. The report also revealed that bad management attributed to 56% of corporate failures.

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