Taxman clueless over Arctic Systems costs

The taxman has never estimated the legal cost of taking the Arctic Systems’ case, it has admitted in revelations that are likely to open questions about the government’s decision making where big tax cases are concerned.

HM Revenue & Customs has admitted in response to a Freedom of Information Act request, submitted by Accountancy Age, that it has no calculation of the cost of the case. The case left Geoff and Diana Jones, the couple at the heart of the case, facing a long and potentially ruinous battle through the courts to defend their tax arrangements.

The Tories this week said they now planned to question government officials about their decision-making on the case, adding that the lack of a cost assessment showed a ‘disregard of taxpayers’.

‘HMRC has not calculated or recorded the total cost of this case,’ the response to the FOI request said.

Where lawyers were employed by the HMRC Solicitor’s Office, for example, the taxman has not calculated the cost of their involvement.

Where figures requested under the act do not at present exist, government departments are entitled to reject the requests. But the fact that no calculation of the cost was made or an assessment of the value for money to the taxpayer of the battle, may prove even more troubling for the department.

‘It’s a disregard of taxpayers, and they’ll be astounded to know that HMRC has done this,’ said Mark Hoban, Tory shadow financial secretary to the Treasury.

‘On a value-for-money standpoint they should monitor the costs. They wouldn’t give lawyers a blank cheque on this.’

The revelation raises serious questions as to what kind of risk assessments the department makes on big cases. HMRC was seeking only £6,000 from the Jones’ and did not regard it as a test case, so its decision to pursue it all the way to the House of Lords will raise questions over its expenses.

The battle is thought to have cost Arctic Systems’ advisers a six-figure sum alone.
The seven-year battle, revolving around the tax structure entered into by the husband and wife business, went against the taxman unanimously in the House of Lords this summer.

‘When they start do they not take into account the cost/benefits of the case?,’ said Anne Redston, personal tax committee chair at the CIoT.

‘Somewhere they must have made a decision to pursue and cost that. The estimated cost must have been part of the process, and there must also be some type of autopsy [after losing the case]. I wouldn’t want to see a repetition of this,’ Redston added.

Geoff Jones, who fought the taxman, said: ‘It looks almost incompetent, they obviously don’t want to answer the question.’