Wave of litigation expected after tax law passes

Dozens of new judges will be recruited to deal with a wave of court cases after the new tax avoidance law takes effect next month.

The Judicial Appointments Commission is preparing to advertise 39 full and part-time tax tribunal posts to solicitors and barristers to deal with an expected surge in the workload after HM Revenue and Customs (HMRC) sends out new tax demands, the Financial Times reports.

Expectations that this will be the case were raised by Treasury minister David Gauke, who told MPs the changes are “expected to prompt a range of legal challenges”.

The retrospective nature of the rules has been attacked by the Treasury select committee, the Law Society and the Chartered Institute of Taxation, but the Treasury has pushed ahead with them anyway. 

Discussing the implications of the new legislation with the paper, Martin Taylor of Rebus Group, a firm that advises companies on tax, said the new rules designed to bring in more revenue to the Treasury mean the tax authorities will be much more pro-active in chasing firms down.

“Pretty much any structure that has used some form of debt leverage to produce or increase tax losses is fair game for HMRC,” he remarked.

The government is under political pressure to deal with the issue of tax avoidance, amid widespread public antipathy towards companies and wealthy individuals who avoid paying tax at a time when austerity is reducing the extent of public services on offer. 

Figures published by the Treasury last month indicated that it had made some progress in managing to recoup unpaid taxes. 

These showed that over the past year HMRC had managed to recoup an extra £23.9 billion in extra tax through its investigations. This was £3.2 billion more than in the same period in 2011-12, £9 billion more than in 2010-11 and £1 billion more than the target figure set in the 2013 Autumn Statement. 

Speaking at the time, Mr Gauke said: “We set HMRC ambitious targets to increase its yield and the figures published today demonstrate that HMRC is successfully meeting these challenges.”