Is HMRC redefining tax avoidance to exclude the likes of Google, Facebook and Amazon?

HMRC has put out an extraordinary publication about tax avoidance in which it seems to suggest, contrary to its messaging and policies thus far, that if a structure works, it is not tax avoidance, says Jolyon Maugham QC, specialist tax barrister at Devereux Chambers
The publication in question, a ‘policy paper’, Taxing the profits of companies that are not resident in the UK, contains this extraordinary assertion:

Having a UK website does not mean that a non-resident company has either a fixed place of business in the UK or a dependent agent in the UK. All of the trading activity could be taking place outside the UK.

Most multinational businesses are not single companies, but a group of companies, only some of which will be operating in the UK.

For example, sometimes a company from outside the UK sells to UK customers via the internet. Another group company in the UK provides warehousing, distribution or other services and support to the selling company. Where this takes place, the UK service company will be taxed only on the profits of its own business, ie the services it provides to the selling company.

This is not tax avoidance: it is simply the way that Corporation Tax works, ie it applies to individual companies.

In effect, say HMRC, if it is ‘the way that Corporation Tax works’ then it is not ‘avoidance’.

So what?

There are a lot of problems with this statement.

The most glaring of them is that it has as its consequence that there is no such thing as tax avoidance. If the structure works it’s not tax avoidance. And if the structure doesn’t work, by definition it doesn’t avoid tax, and so it can’t be tax avoidance either.

Another is that it is contradictory to the definition of avoidance that HMRC itself adopts for the purposes of calculating the tax Gap, as set out by the tax department in its Measuring tax gaps 2015 publication:

Avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law.

For this purpose of calculating the tax gap, HMRC say (and this time rightly) that even if a structure does deliver a tax reduction it can still be avoidance – ‘where it serves little or no purpose other than to produce a tax advantage.’

The most extraordinary thing of all is that HMRC is going out of its way to provide political cover for businesses which engage in abusive tax practice.

Where is the public interest in HMRC saying, publicly, that it is not avoidance for businesses to establish with a view to minimising their tax liability these highly artificial structures?

Why on earth is HMRC acting as public relations agency for Google, or Facebook, or Amazon?