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  • Mail Order: HMRC Faces Further Bullying Accusations

    4 March 2019

    Andy Wood

    In their most candid moments, even ardent supporters of HMRC must admit that the last few months have not been kind to its reputation.

    Just before Christmas, a House of Lords committee issued a less than festive critique of new Revenue powers designed to tackle avoidance and evasion.

    Whilst underlining the fact that not paying one’s tax is a bad thing, the peers involved outlined their concerns that the balance between taxman and taxpayers had been tipped in favour of the former.

    Add to that, the continuing controversy over the Treasury’s insistence on pressing ahead with the introduction of a loan charge in April despite warnings that some of the tens of thousands of contractors in HMRC’s firing line could be made bankrupt.

    Then, only a week or so ago, the Revenue was roundly condemned for its decision to pursue a homeless man for failing to submit a self-assessment return on time – something which, as one of our previous ‘blogs remarked was derided by a tax tribunal judge as both “ridiculous” and a “scandal”.

    HMRC decision derided by a tax tribunal judge as both “ridiculous” and a “scandal”.

    However, for newly-beknighted Chief Executive, Jon Thompson, the bad news keeps on coming.

    HMRC now stands accused of writing “bullying letters” to thousands of individuals with overseas bank accounts or investments.

    According to Carol Lewis of The Times, the Revenue had send letters suggesting that the men and women in question “may have received overseas income or gains which is taxable in the UK”

    Although the letters sent by HMRC’s Risk and Intelligence Service don’t make any allegations or explicitly demand payment of tax, they have requested that recipients sign a declaration form acknowledging that submitting false information is a criminal offence which “can result in investigation and prosecution”.

    The wording is far stronger than that found on more routine tax returns and no doubt amounts to the Revenue trying to put the frighteners on people unfortunate enough to have one of these communications drop through their letterbox.

    I am all too aware of these letters having had individuals approach me for advice on similar letters and what they should do with them…

    One such individual had received a letter for apparently failing to disclose income on a property she owned. The reality was that there was no income generated by this property as it was their home! Indeed, it was the same property they had on their self assessment records, and to which they had posted the offending correspondence.

    Of course, we are quick to jump on the backs of HMRC. Quite simply, this could be dismissed as a simple misunderstanding.

    However, it is the fact that the letter was also accompanied by a letter asking for the client to certify (by ticking one of two boxes) that:

    • their affairs were either up to date; or
    • they needed to bring them up to date

    This certification was underscored with the same threats set out by Carol Lewis that a false statement could result in a criminal offence.

    These sorts of declarations normally come at the end of an investigation and are, in effect, a disclosure that those subject to inquiry or punitive action have informed the taxman of all material facts.

    If other matters subsequently come to light, then the penalties can be quite severe.

    Take the example of the famous former jockey Lester Piggott. He had made just such a declaration – albeit in the more serious context of being investigated for a third time – issued the Revenue a cheque from a previously unknown bank account by way of settlement!

    He ended up serving 366 days of a three-year jail term.

    However, in the context of my client and those referred to by Carol Lewis, submission of the certificate is wholly voluntary.

    My advice to the client was that we simply to write to HMRC and clarify the position with them.

    There was no need for my client to make any statements or declarations about the rest of her tax affairs.

    Commentators are already suggesting that this latest tactic is rather underhand. It might mean that individuals who feel obliged to sign these documents – regardless of which box they are ticking on these forms – are potentially fast tracking themselves in to more serious HMRC investigations and even prosecution should tax errors and inaccuracies come out of the woodwork.

    In this greater age of transparency and IT based systems, the information now available to HMRC and other revenue authorities around the world is unprecedented (Read more on MTD).

    One might think that this alone is likely to mean that more errors, mistakes and deliberate inaccuracies are discovered.

    HMRC has sought to increase the time that it has to investigate what it deems to be “non-deliberate offshore non-compliance”

    However, if one casts one’s mind back to last July, HMRC sought to increase the time that it has to investigate what it deems to be “non-deliberate offshore non-compliance”

    We aren’t talking hard-core tax evaders but, as the Revenue guidance put it, “individuals, trustees or others liable to Income Tax, Capital Gains Tax or Inheritance Tax on offshore income, gains or chargeable transfers who have made errors that are not deliberate”.

    For some people, it can be difficult enough to recall what happened weeks ago. The HMRC change – which, interestingly, the House of Lords recommended should be withdrawn – gives it the power to sift through 12 years of paperwork to construct a case based on what might, simply be a mistake.

    Issuing firmly-worded letters in the hope of trapping taxpayers in to voluntary disclosures once again asks serious question as to what is going on within HMRC

    HMRC is quite correct to pursue those who don’t pay their fair share in tax but, in my opinion, issuing firmly-worded letters in the hope of trapping taxpayers in to voluntary disclosures once again asks serious question as to what is going on within HMRC.

    If you have received one of these letters or have any queries at all regarding tax matters then please get in touch.