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HMRC doubles budget for worst-case tax proceedings

HM REVENUE & CUSTOMS has more than doubled its worst-case estimate should it lose its most significant court cases, its latest accounts show.

The taxman is currently fighting several court battles over disputed tax payments, and in the worst-case scenario could be forced to refund as much £42.8bn to companies which believe they overpaid years ago.

Provisions where payouts are more likely than not rose by around a third to £7.2bn in the year to March 2015.

The largest portion of the estimate relates to ‘contingent liabilities’, where payments are considered possible, rather than likely. Contingent liabilities hit £35.6bn in the year to March 2015 – a rise of a fifth, after doubling the year before.

Companies involved include Littlewoods, the retailer, British American Tobacco, the tobacco group, and Prudential, the insurance group.

In June it emerged HMRC is seeking to appeal a ruling by the Court of Appeal to repay Littlewoods £1bn in VAT and interest.

The court found that the retailer’s case for compound interest on VAT overpayments that it made between 1973 and 2004 was valid – despite HMRC having already repaid the VAT with simple interest – and ordered HMRC to pay £1.2bn to the Barclay brothers-owned chain.

A spokesman for HMRC said: “HMRC wins more than 80% of cases at tribunal. We are required for accounting purposes to include an estimated contingent liability figure of potential repayments of tax. There is no question of this amount or anything close to this amount ever being repaid as the figure is based on our losing every single case currently being litigated, which is not going to happen.”

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