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Backslap or Claptrap: Does HMRC deserve plaudits for tax avoidance crackdown?

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Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

In a time of high uncertainty and no little stress in Whitehall, ministers and civil service mandarins will surely take crumbs of comfort wherever they can find them.

Having one’s ego stroked by the mainstream media for a change instead of receiving the more expected criticism would no doubt be classed as one such development.

That’s been the good fortune of HMRC, courtesy of The Times’ Economics Editor, Philip Aldrick.

In a comment piece for the ‘paper, he described “the war on tax avoidance” as “a remarkable and lucrative success”.

Seasoning his copy with the kind of language oft-used by those favouring zero tolerance of anyone not handing over a great, brimming bag of cash to the taxman without question (“slippery offshore havens”, “squirrel away small fortunes”), he noted that, as a result of previous scepticism of its efforts on avoidance and evasion, HMRC “now has a machine in place” to deal with both.

Mr Aldrick was responding to a statement issued by the Financial Secretary to the Treasury, Mel Stride, which trumpeted the scope of the Government’s anti-avoidance initiatives and the resulting windfall.

In the course of the last nine years, explained Mr Stride, more than 100 such measures had been introduced which had “secured and protected £200 billion in tax revenue that would otherwise have gone unpaid”.

He added that a further 21 schemes announced in last year’s Budget were in the pipeline and would net an additional £2.1 billion by 2023-’24.

All well and good, you might say. Of course, one it is difficult to to argue against HMRC taking steps to counter those unfairly dodging tax. However, I don’t think that we should take HMRC’s rhetoric at face value either.

First of all, it’s arguably not uncommon for HMRC and its supporters to make issues of tax more dramatic than they need to be.

If they’re not invoking the spirit of a morality play, their vocabulary is ripped straight from that of an action movie.

Take the fanfare associated with its latest annual report, in which HMRC boasted that its new anti-avoidance tools allowed it to respond “with maximum impact” to the threat of avoidance and evasion.

If its Chief Executive, Sir Jon Thompson, perhaps has designs on fashioning himself as the Treasury’s ‘Terminator’, the numbers may reinforce the idea that there’s no little fiction afoot.

Yes, the very same report which proclaimed a breakthrough in its battle with nasty avoidance and evasion types did show bumper tax receipts of £605.8 billion – up 5.4 per cent on the year before.

That still represented a slow-down on 2016-17 when income rose by 7.1 per cent to £574.9 billion.

What that suggests is that the Revenue “machine” cited by The Times might possibly be running out of steam.

Why?

Well, up to now, HMRC has had some joy in picking off what the Daily Telegraph, for instance, has dubbed “the low-hanging fruit“.

Listed in the Revenue’s annual report is a veritable arsenal of initiatives. They range from the Disclosure of Tax Avoidance Schemes (DOTAS) to the use of Accelerated Payment Notices (APNs) which delivered £800 million up-front “while their dispute is being resolved”.

Indeed, it is my view that APNs single-handedly destroyed the retail market for UK tax avoidance amongst individuals and SME’s.   The linking of DOTAS and APNs mean that one would need to be as mad as a badger to enter a disclosed scheme.

The problem with easy kills is that they have a tendency to become extinct. The word DOTAS could easily be replaced with dodo.

Once you’ve eaten all the dodo’s, where do you get your next slice of meat?*

We are already seeing signs that the taxman is having to work harder to close the so-called ‘tax gap’

It might be suggested that this is one reason for the sort of situation which I wrote about only last month in which HMRC was derided for its “ridiculous” attempt to fine a homeless man for late filing of a self-assessment return.

Could it also be why HMRC is so keen to drive through the highly contentious and imminent loan charge which an all-party group of MPs reported might be to blame for as many as six people taking their own lives.

It’s probably true that even without the administrative headache of coming to terms with Brexit, the Revenue’s top brass are giving some thought as to what “remarkable and lucrative” initiatives may remain.

I reckon that the extra wealth of information arising from the global application of the Common Reporting Standard  may well cause Sir Jon and his colleagues to keep their passports close to hand as they target offshore riches.

In this area, and in addition to this slew of information, HMRC now has significant new powers (such as the guilty unless one proves innocence strict liability offences) and the controversial 12 year window in which it can discover taxpayer areas

I also can see other technical areas – far from the egregious tax avoidance we have hitherto seen – that are ripe for HMRC’s attention. But that’s for another day.

So, once the congratulatory back-slapping has subsided, HMRC will not only need to set its mind to how it continues with its task of ‘maximising revenue’ and closing the tax gap.

But also from whom and how aggressively it will pursue them.

 

If you have any queries regarding HMRC’s powers ,or HMRC have opened an enquiry in to your affairs, then please do not hesitate to get in touch.

 

*Note – I don’t really know whether dodos were eaten in to extinction. However, if you don’t make a big issue of it I will agree to abandon the metaphor immediately.

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