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Who’s not paying their taxes?

In the United Kingdom, HM Revenue & Customs has beaten its “massively ambitious” target for total revenue collected as a result of its tax investigation work by £2bn in the 2012-13 tax year, hitting a new record, UHY Hacker Young reports. So great was the haul that some might be tempted to question the degree of enforcement effort being focused by HMRC on its tax investigation efforts, a tax partner at the accountancy group noted.

In a statement released in December 2013, UHY Hacker Young reported that a record £20.7bn in additional revenue was collected by HMRC through compliance work focused on tax avoidance and evasion in the 12 months to the end of March 2013. This, it noted, represented an 11% increase from the £18.6bn taken in the previous year.

The year’s target of £18.7bn was already £2bn higher than HMRC’s target for the previous year, the accountancy group pointed out.

The extra revenue extracted by HMRC’s tax investigators came both from small businesses and individuals, the UHY Hacker Young data shows: that from small businesses jumped 30% in the year to 31 March, to £565m, while the share clawed back from investigations into personal tax returns rose by 38% to £609m.

Target ‘smashed’

Roy Maugham, a tax partner at UHYHY, said that even though HMRC’s target for the amount of extra revenue it wanted to “claw back” through its compliance investigations in 2012-13 had been“massively ambitious”, it had “managed to smash through it”.

“This is good news for the Treasury, but you have to ask whether all the extra enforcement activity needed for HMRC to over-shoot its target is a good thing or not,” Maugham added.

“There is a risk that HMRC’s hardline tactics pressurise some into making payments that they might not even owe.

“Not all of the extra tax take is from clear-cut tax evasion – it is often from HMRC imposing its view of how the tax system works on SMEs and individual tax payers, through the use of an army of tax inspectors and lawyers.

“Businesses and taxpayers that can’t afford professional advice to deal with a HMRC investigation don’t stand a very good chance.

“Many feel they have no choice but to just pay up otherwise they risk being dragged into expensive litigation.”

The record HMRC compliance tax take also comes at a time when many businesses and individuals are still struggling with the effects of the recession, Maugham noted, and as budget cuts are putting a strain on HMRC’s resources.

The Revenue’s currently high rate of staff turnover is also reducing the ranks of experienced personnel which, Maugham noted, could increase the risk of mistakes in its tax calculations, while pressure on HMRC to maximise its tax might also be encouraging some staffers to pursue more contentious claims.


‘Outstanding results’ A spokesperson for HMRC responded to the UHY Hacker Young comments by noting that since 2010 the UK government had invested nearly £1bn in HMRC “to catch the cheats”, and now, “that investment is delivering outstanding results”.

“The vast majority of taxpayers play by the rules, and on their behalf we are increasingly employing sophisticated computer systems and risk analysis to catch the minority who don’t,” the spokesperson added.