HMRC adopts heavier stance on defaulters

John Flood explains the background to an important new HMRC enforcement programme.

On 27 March, HMRC issued a release announcing that the department was keeping up the pressure on tax cheats by introducing a new monitoring programme from 1 April for serious tax defaulters. This new approach replaces the previous “managing deliberate defaulters” programme.

The new scheme extends the criteria of defaulters who may be subject to enhanced monitoring of their tax affairs. They are now persons who have been...

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Comments

More rubbish?    1 thanks

The Black Knight | | Permalink

Having failed to use the previous rules they have spent valuable time re writing them again for future non use?

Even the criminals must have noticed how this works.

HMRC seem to be obsessed with taking ineffectualism to new levels.

Gutter Press

hiu612 | | Permalink

 That HMRC press release reads as if it has been written by a sleaze page journalist rather than a government department. Surely tax evaders don't get put on lists, they get prosecuted? And surely putting companies into insolvent liquidation or becoming personally bankrupt is hardly a tax avoidance strategy, and more a necessity of a failed business? I wonder if the focus is insolvent pre-packs rather than liquidations? If you are going to avoid/evade tax using a liquidation, surely you need a bent IP, and there must already be plenty of ammo for going after them? I fear this is just more buzz-word publicity aimed to fuel the sensationalism which seems to drive tax policy at the moment.

Gutter Press

hiu612 | | Permalink

 That HMRC press release reads as if it has been written by a sleaze page journalist rather than a government department. Surely tax evaders don't get put on lists, they get prosecuted? And surely putting companies into insolvent liquidation or becoming personally bankrupt is hardly a tax avoidance strategy, and more a necessity of a failed business? I wonder if the focus is insolvent pre-packs rather than liquidations? If you are going to avoid/evade tax using a liquidation, surely you need a bent IP, and there must already be plenty of ammo for going after them? I fear this is just more buzz-word publicity aimed to fuel the sensationalism which seems to drive tax policy at the moment.

Serious "tax defaulters".

jiatbanus | | Permalink

Does that mean people who take their defaulting seriously? Wouldn't it be good if HMRC and the Government took taxation seriously rather than believing that the "help yourself to the fruits of others efforts"  was morally justified. Maybe there would be fewer defaulters if there were fewer stupid taxes.

Gutter Press has pretty well got it right. Except - there are no bent IPs any more than there are any bent HMRC tax collectors or MPs!

 

insolvent company's?    3 thanks

The Black Knight | | Permalink

It is not wrong.

The easiest way to evade tax is to form a company (online) with no accountant.

trade through the company for a year or two...do not file accounts....companies house will strike off.....HMRC will not persue or even raise a determination.

No action will be taken in respect of the Taxes Act or the Companies Act.

repeat for up to 20 times in a life time? No Tax .....Not ever...scheme endorsed by Companies Hoose

 

If it's larger and you want to make sure use an insolvency practitioner....final period of trading accounts rarely drawn up so who knows what true position of directors loan account was or what other defaults occurred, undeclared cash sales etc....all put to bed never to be reopened.

Added to which if you never paid your creditors then perhaps you made a tax free profit in the final periods of trade...certainly HMRC will loose the tax in bad debt relief anyway.

HMRC would certainly never reopen a case and go back 20 years so this is an excellent tax evasion and money laundering vehicle..  WHICH

they like to sit and watch......sorry monitor closely.

johnjenkins's picture

@Black Knight    2 thanks

johnjenkins | | Permalink

That's why the rest of us get punished with vigour.

daveforbes's picture

@Black Knight    1 thanks

daveforbes | | Permalink

How would you stop that ?

johnjenkins's picture

It's stopped    1 thanks

johnjenkins | | Permalink

by HMRC doing their job properly and not letting things slip knowing they can punish the not so knowing. 

Well now you ask if I were king    3 thanks

The Black Knight | | Permalink

I would

1, Make use of the information I had collected. (most of these cases are so easily spotted by someone with the right skills)

2, Import the right skills, accountants guns for hire...commission basis.

3, Prosecute more cases, nothing like a good hanging. Tax evasion is criminal and the civil route should be a lucky break.

4, Use determinations...the easy acceptance of which is a clue that the tax is underpaid and failure to notify HMRC that their determination is short is deliberate evasion.

5, Make Companies house and HMRC and the insolvency service and the fraud squad and SOCA play together instead of against each other (unless it's on the rugby field)

6, Divert more resources to fixing the deficit, supporting honest hard working taxpayers by dealing with the criminals they are forced to compete with.

7, Enforce the Companies Act and go for directors that have not complied by lifting the corporate veil, there are so many defaults with these companies and any moneys that have just been withdrawn are still owed to company....So recover them Mr official receiver?

8, Disqualify more directors,

9, COP9 then ask how did you pay for your house, Mercedes and foreign holiday sir? Have enquiries dropped the lifestyle questions entirely now?

Rumors would soon spread via the man in the Pub and the deficit would magically disappear.

In short It is only about enforcing the rules we already have...Simple really.

 

 

johnjenkins's picture

I'm glad you agree

johnjenkins | | Permalink

Black Knight, but we all know what will happen.

Lemmings

The Black Knight | | Permalink

johnjenkins wrote:

Black Knight, but we all know what will happen.

They will continue to believe they are lemmings.

and

continue to believe that Lemmings jump off cliffs?

 

We are all doomed I tell ya doomed!

 

 

Black Knight is so right..    1 thanks

Dusty | | Permalink

There are no penalties for abandoning your company and allowing it to be dissolved by CH.

"When an application is accepted Companies House will no longer chase for further compliance" 

Nor any I imagine for dissolving it yourself. Why wait if the creditors are breathing down your neck ? 

Is there any evidence anywhere that anyone at Companies House has ever NOT accepted a DSO1.

Last year Viagogo ltd changed its name to CIS ltd then 4 days later liquidated CIS ltd while continuing to trade as Viagogo ltd.

Did they get....or has anyone ever been...

  • "Charged a penalty for deliberate misconduct under taxes legislation"?
  •  

Cup of tetleys

deg2yq | | Permalink

Yes what's all the fuss about?

Have a cup of tetleys and calm down

the legislation is there

The Black Knight | | Permalink

the legislation is there but no enforcement.

Companies Act 2006 s.393 s.394 s.441 and penalties s.387 s.451 s.419(3) s.425 I am sure we can add more but the companies Act seems to be a wish list rather than an Act of parliament?

Then there's s.993...up to 10 years inside? rather trumps a minor 7 years for fraudulent evasion of tax?

Companies house have a target of complete compliance and no penalties? Which in civil service land means: If we hide the defaults we can meet our target and get our bonus.

CIS?

The Black Knight | | Permalink

Dusty wrote:

Last year Viagogo ltd changed its name to CIS ltd then 4 days later liquidated CIS ltd while continuing to trade as Viagogo ltd.

Did they get....or has anyone ever been...

  • "Charged a penalty for deliberate misconduct under taxes legislation"?
  •  

CIS Limited according to companies house was always dormant?

daveforbes's picture

How are companies house to

daveforbes | | Permalink

How are companies house to distinguish between the tens or even hundreds of thousands of companies that are registered, never trade and then dissolve and the ones that trade, don't file accounts then dissolve ?

They cannot thats the point: DELIBERATE?

The Black Knight | | Permalink

daveforbes wrote:

How are companies house to distinguish between the tens or even hundreds of thousands of companies that are registered, never trade and then dissolve and the ones that trade, don't file accounts then dissolve ?

They could however insist that accounts are filed, as required.

The late filing penalty only crystalises when the accounts are filed. Why is this?

HMRC late filing penalties apply whether the return is filed or not.

How would they do this? Summary Prosecution of the directors.

 

If dormant accounts are filed, agreed by the directors when they are not dormant then the director committed an offence.

This is not just a companies house problem all the other government departments have the same attitude problem. It is endemic.

The insolvency service - waste of space

SOCA - waste of space

HMRC - waste of space

The Government - waste of space

@Dave

The Black Knight | | Permalink

@Dave

If you are looking for a software solution.

1, all late accounts notified to HMRC

2, Directors with multiple company failures - repeat offenders - notify HMRC

3, Non companies act compliant accounts - notify HMRC - widens discovery window. and HMRC haven't a clue what is compliant and what is not.

4, cross check accounts filed at companies house with HMRC

5, cross check comparative with last years accounts

6, cross check corporation tax liability in accounts with HMRC

7, check directors at companies house exist

8, fast track summary prosecution paperwork prepared and filed with court.

9, Automatic determinations by HMRC for late accounts - soons gets clients bleeting

10, late accounts = enquiry - yeah right that never happened did it.

There's lots more but sometimes you need human eyes, brain and experience that a computer just can't match.

 

johnjenkins's picture

Taking everything on board,

johnjenkins | | Permalink

isn't it about time that Companies House was abolished and Limited companies had to be set up through HMRC just like SA. Cos to me (nowadays) the only real difference is limited liability. Why do we need an annual return (there is no penalty) when all that is needed is a form to change things.

As you said Black Knight they are all a waste of space.

Perhaps we ought to get the North Korean bloke (can't remember his name) to come and sort out our Civil Service.

AR and Accounts Filing.

jiatbanus | | Permalink

Companies House have plenty of sanctions and they don't need the help of the tax collectors. Completely different function.

It is a "Criminal Offence" not to file on time. They even take late non filers of AR of Dormant Companies to Court. Don't try to emigrate to the USA after you have ANY criminal offence!

Striking Off is not always as easy as suggested. HMRC constantly object. Contrary to that, trying to prevent a Striking Off can be a real chore (if you're not HMRC).

Changing names prior to a Liquidation is not unusual and the Liquidator is required to advise the Creditors of this change. If the Creditors choose not to question it, that's up to them. They are the one's who have suffered a loss. It is also a fact that HMRC are more active since they lost their priority and their blocking of striking off has caused more to take the "proper" course of winding up rather than to sneak a striking off, and so a Creditors Meeting.

It is the NUMBER that is the constant. The Liquidator is required to report to Dept BIS.  

This is all quite far removed from HMRC "getting heavy" with defaulters. Keep in mind that the problem is not necessarily the defaulter, it's the taxes in the first place. 

not that I've seen

The Black Knight | | Permalink

jiatbanus wrote:

Companies House have plenty of sanctions and they don't need the help of the tax collectors. Completely different function.

It is a "Criminal Offence" not to file on time. They even take late non filers of AR of Dormant Companies to Court. Don't try to emigrate to the USA after you have ANY criminal offence!

Striking Off is not always as easy as suggested. HMRC constantly object. Contrary to that, trying to prevent a Striking Off can be a real chore (if you're not HMRC).

Changing names prior to a Liquidation is not unusual and the Liquidator is required to advise the Creditors of this change. If the Creditors choose not to question it, that's up to them. They are the one's who have suffered a loss. It is also a fact that HMRC are more active since they lost their priority and their blocking of striking off has caused more to take the "proper" course of winding up rather than to sneak a striking off, and so a Creditors Meeting.

It is the NUMBER that is the constant. The Liquidator is required to report to Dept BIS.  

This is all quite far removed from HMRC "getting heavy" with defaulters. Keep in mind that the problem is not necessarily the defaulter, it's the taxes in the first place. 

Not in my 30 years experience have they ever prosecuted when they could. They have always happily accepted horribly misleading accounts and assisted in preventing HMRC from collecting their money by striking off instead of prosecuting the directors.

USA-- big deal who would want to go there anyway, and it is only because they control GB data bases that this happens you can still go to any other country so long as you don't tell them, which oddly enough is what dishonest people tend to do?

See no evil?

Dusty | | Permalink

jiatbanus wrote:

Changing names prior to a Liquidation is not unusual and the Liquidator is required to advise the Creditors of this change. If the Creditors choose not to question it, that's up to them.

You make it sound like wearing odd socks. It's not. It's a bit like saying if the person who got robbed didn't go to the police where's the harm in robbing them? 

In fact the company I happened to name were doing it because they'd just been exposed in fraudulent acts by a channel 4 documentary but if there is an honest reason for doing it I can't think of one.