With comedian Jimmy Carr’s tax avoidance dominating headlines, bold statements have been coming out of HMRC about “investigating” the K2 scheme — but a report by the NAO indicates that the taxman is too scared to pursue tax avoiders through the courts.

Confirming that they were investigating the offshore loophole, HMRC said:

“If it [K2] does work technically, HMRC will challenge it in every way. There is no way anyone, no matter who they are, is going to get away with paying less than they should.”

Which sounds pretty tough. But a report from the National Audit Office into HMRC’s dealings with tax avoidance revealed that the department were frequently reluctant to take avoiders to court, for fear that they would lose. The report says of one case:

“If [the matter had gone to litigation], there was a substantial risk that the Department would have received nothing.”

HMRC’s record is, admittedly, not brilliant. After Vodafone avoided a £6bn tax bill, and was earlier this year revealed to have used a sham operation in Switzerland in order to avoid tax on its profits, with an office run by a single bookkeeper.

Jimmy must be quaking in his boots.

  1. You don’t sue someone for tax avoidance. HMRC issue a tax claim and let the avoider explain why its invalid. I understand this scheme is pretty ropey.

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