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Closing In On Tax Evasion HMRC Report

In December 2012, HM Revenue & Customs published an online booklet entitled Closing In on Tax Evasion.

The Government’s programme of austerity has propelled debates about the equality of the tax system into the national papers. In recent months, the tax affairs of public figures and high-profile corporations have been exposed and discussed on an unprecedented scale: Amazon, Starbucks and Google have all been accused of paying far too little. The moral and legal distinction between tax evasion and avoidance are being eroded in the public mind.

Reacting to this surge of debate and concern, the fourteen-page document Closing In on Tax Evasion sets out HMRC’s objectives, recent achievements, short term tactics, and longer term strategy for stamping out tax evasion in the UK.

In the foreword, David Gauke (Exchequer Secretary to the Treasury) declares that the publication should reassure honest tax payers that HMRC is committed to enforcing taxes fairly and strictly. He adds: ‘It’s also a message to those who evade that we are determined to detect and deal with them – the net is closing in’.

The range of actions that have already been taken

HMRC has:

• signed an innovative agreement with Switzerland to recover billions of pounds in previously uncollected tax

• developed and expanded its technical capability to join data together and uncover the hidden links in data using the advanced capabilities of Connect, HMRC’s new computer system.

• handled around 130,000 reports in the last year from the Tax Evasion and Customs Hotlines, which allow the public  to  notify HMRC confidentially  if people are not paying the tax they owe

• created the Offshore Coordination Unit, dedicating an additional 100 investigators to tackling offshore evasion

• established a dedicated team dealing with the tax affairs of about 5,000 of the wealthiest individuals that has already brought in an additional £500 million in tax since 2009

• brought in expertise from the private sector to help HMRC to deploy the latest thinking and techniques

• invested in a team of experts who, in collaboration with the Dutch Tax Administration, have developed tools and techniques to mine the internet for data

HMRC’s Success Stories and Achievements

Using third party data HMRC identified an individual who was found to have 11 undisclosed properties in several Mediterranean countries. The total cost of the properties exceeded €1.3 million despite the individual declaring UK income of just £6,000.

As part of a campaign aimed at medical professionals, Connect helped HMRC make the links between tax records and data from hospitals, pharmaceutical companies and insurers. This has resulted in £33 million in unpaid tax being recovered so far including one case of £1.2 million. One doctor was also prosecuted for trying to evade £92,000 of tax.

The HMRC has seen more than 400 criminal convictions in 2011-12 achieving £1 billion of revenue benefit, either in losses prevented, or in payment of tax

HMRC has begun to apply a penalty since 6 April 2011 of up to 200 per cent of the tax due if an individual does not tell them about income or gains from an offshore bank account.

Short Term Plans

In the short term, HMRC will:

December

  • Launch a radio campaign
  • Establish a new unit dedicated to tackling offshore evasion

January

  • Begin implementing the Swiss/UK Tax Cooperation Agreement
  • Launch a campaign on missing VAT returns
  • Use the latest extract of Land Registry data to chase companies who try to evade property tax
  • Begin analysis of Self Assessment returns to identify potential evasion

February

  • Pilot a new scheme of credit reference checks
  • Set up five new task-forces targeting high risk groups

March

  • Start a new campaign to target those who profit from multiple properties in the UK or abroad who have not paid their tax liability
  • Publish a comprehensive strategy to tackle offshore tax evasion

April

  • Complete the increase in the number of investigators dedicated to pursuing affluent tax evaders and avoiders
  • Add almost half a million tax evasion hotline reports made by the public into the Connect system

May

  • Begin testing new data from the Police used to identify fake identities being used in fraud
  • Begin new work to identify offshore trusts that are being used to hide income

 Long Term Goals

HMRC plans to:

  • Continue to improve its  analytics and risking capabilities by training additional risk analysts and expanding its use of Connect
  • Build on its enhanced automatic exchange agreement with the USA – the first of its kind – and look to conclude similar agreements with other jurisdictions
  • Increase the number of criminal investigations into offshore tax evaders, publishing the names and details where appropriate and applying penalties for those who hide assets in jurisdictions that don’t provide HMRC with full exchange of information
  • Ramp up action against affluent tax evaders; using data to focus on serial offenders, offshore properties, and high risk professions or groups
  • Increase the annual number of prosecutions for evasion five-fold by 2014-15
  • Launch 20 new task-forces every year between now and 2015, using data to help target high risk groups or sectors

Please feel free to contact TaxAgility on 02087802349 should you require any further information.

This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.

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