A £43 billion payout by HM Revenue and Customs (HMRC) doesn’t sound realistic, and it probably won’t happen. However, as a precaution this is the amount they have stated in a worst case scenario.
It’s been reported that multiple companies are presently jammed in litigation with HMRC in regards to money that is owed. These firms are in disagreement with HMRC in relation to overpaid taxes ranging over numerous years.
The sum of £43 billion that HMRC has arrived at is actually a very safe estimation in order to account for a full blown loss. This outcome is highly doubtful; however, HMRC does not want to take any chances.
Chas Roy-Chowdhury, Head of Taxation at Association of Chartered Certified Accountants, had this to say in regards to the issue, “This is the absolute worst-case scenario for payouts but, as HMRC takes an increasingly aggressive stance on tax collection, it could find itself facing growing numbers of legal challenges – and paying out more refunds.”
HMRC has actually stated that if it were to lose, a more realistic refund would be closer to the amount of £7.2bn. Out of the total amount HMRC has set aside, the remaining £35.6bn as ‘contingent liabilities’ where a refund is possible rather than likely.
An HMRC spokesman said: “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.”
With HMRC stating a win rate of 80% of litigation cases they are fairly confident that any refunds that do occur will be very minimal.