HMRC targets lawyers in tax crackdown

London lawyers have become the latest target in HMRC’s taskforce initiative as the Revenue widens its net to tackle tax dodgers from hair and beauty businesses to the motor trade in Scotland.

HMRC has called the latest campaign an “intensive burst” of activity in specific high-risk trade sectors and locations, and is expected to bring in £19.5m.

In what appears to be a firmer and more Draconian approach to targeting the professions, the threat to accountants could be just around the corner.

Continued...

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johnjenkins's picture

This is even more

johnjenkins | | Permalink

interesting given the fact that when SA came into being 6% of all business was going to be investigated. The computer would pick out 2% at random and the extra 4% would come from normal risk assessments (mainly cash business). Rather than publish random umpteen million from here there and everywhere, perhaps it would be reasonable to ask HMRC what percentage of business are investigated.So HMRC are hoping to get £3.5M from the legals. Good luck. How desperate will HMRC get when they realise that they will get nowhere near the £7bn quoted. Can't wait for the Tupperware etc. parties to be targetted, that should bring in at least half a crown (oops 13p).

listerramjet's picture

i'm confused    2 thanks

listerramjet | | Permalink

exchequer secretary David Gauke said “It is not fair that at a time when most hard-working people are paying the right tax, others are trying to get out of paying what they should.”

is this really a minority of hard-working people and all non-hard-working people?  Does he really think that all lazy people are tax evaders?  I suppose he is also implying that all non-taxpayers are also evading tax too.  Where will it all end?

BUT we are told that HMRC have a large error rate, which means in pratice a large number of taxpayers are not paying "the right amount of tax" - usually through no fault of their own.  I guess we don't really know how many of these are hard-working.

It really is very confusing.  I am wondering if it is the alleged dumbing down of GCSE's that is to blame.  Perhaps all government spokespeople should be required to brush up on their language skills before they are allowed to open their mouths in an official capacity?

Quite a lot of evasion going on!    1 thanks

The Black Knight | | Permalink

But HMRC are unable to target it effectively and are still picking the wrong cases for enquiry and the approach seems to be just a case of going through the motions arguing a loosing technical point, conceding and closing the file!

The results from their targeted campaigns seem to indicate a scatter gun approach rather than intelligence led policing.

Even when they catch an evader the follow through is half hearted. Often they will only collect the Vat and not the tax and Paye or vice se versa and even then it is an underestimate just to get the file closed. Often the Evader is still better of even when caught! Huge deterrent that?

No one will take tax evasion seriously until HMRC do themselves.

Be Interesting to ask how much has been collected from Money laundering reports? None?

paulgrca.net's picture

MPs    10 thanks

paulgrca.net | | Permalink

Given the well documented MP over claims on expenses I would have thought that MPs tax returns should have been top of the list for investigation!

Laywers are an easy target    1 thanks

The Black Knight | | Permalink

1, WIP, give us your time records? billing after date and show how you arrived at WIP figure...+ 70% penalty.

2, partners wife's wages....justify!

standard silly question enquiry to fill up page.

Job done.

Nick Graves's picture

A former client    9 thanks

Nick Graves | | Permalink

...ran a small grocery shop.

He was a lovely man, who is now deceased.

He was done under an investigation (previous accountant) because his profits were so lousy and was bludgeoned into capitulation, before the accountancy costs ruined him.

He maintained that he had been honest throughout (a single nicked packet of fags takes a lot of recuperation, when you only make a few pence on a tin of beans) and was embittered by the experience until his demise.

In this case, I believed him.

That's where yer £7m comes from; not yer Vodaphones or Banksters or Politiciunts or other Public Serpents. Mild-mannered senor citizens who cannot prove what they've NOT done are a far softer target. 

 

 

 

 

 

 

 

I presume that to have avoided significant tax...

justsotax | | Permalink

most of these traders would have actually needed to work hard, be productive and offer a useful service to the surrounding area.....certainly puts them on a level playing field with those who claim to use technically 'legal' schemes to reduce their tax to single figure digits...

Not surprised

The Black Knight | | Permalink

 

Would explain a lot and the lack of a clampdown, unless it's on competitors of course.

johnjenkins's picture

And you have    1 thanks

johnjenkins | | Permalink

the "right amount of tax". This means the legal amount of tax if in HMRC's favour and the morally wrong let's getem (but only to a certain extent cos we still want their votes) amount of tax if not.

KH's picture

At least HMRC are in the right type of area    3 thanks

KH | | Permalink

I remember one investigation in the 90s of a client of mine who owned a Chinese takeaway. Really nice guy, extremely hard-working, and with totally immaculate hand-written and balanced bookkeeping records. Anyway, being Chinese, he knew exactly what GP and NP ratios HMRC were looking for but, one year, due to a genuine slump in trade, he got investigated. His best argument in his own favour, apart from his excellent bookkeeping, was that he just wasn't rich enough to afford to be dishonest. What's more, the tax inspector agreed. So he got off scot free ... although I did have the sneaking suspicion that such excellent bookkeeping just had to be hiding something.....

At least all the lawyers I've met are well rich enough to fiddle. So maybe HMRC is for once barking up the right tree.....

johnjenkins's picture

If you look at in reverse

johnjenkins | | Permalink

KH. Lawyers are probably rich enough not to fiddle. There is no trade that you can actually say fiddles more than any other. Yes there might be more opportunities in cash based trades but then bills have to be paid. If you aren't getting cheques then you have to put cash in bank to pay dd's etc. This blanket £7bn HMRC bandy about is just scare mongering. Those tactics might work when things are not so tight, but with austerity comes guile and a different couldn't care less attitude, which I don't think HMRC understand.

presumably as with doctors

Anthony123 | | Permalink

lawyers can in certain situations get fees that fall outside their usual line of client work - when I worked in HMRC many many years ago there was a long list of situations (including the well known "ash cash") where doctors got a fee - HMRC may have similar in mind for lawyers.

I've come across the mindset that payments outside of the normal course of professional work are some kind of "perk" on which you don't need to pay tax. I imagined this is what HMRC were after with lawyers rather than straightforward not putting fees through the books type evasion.

 

 

Statutory charges ?    2 thanks

The Black Knight | | Permalink

Statutory charges? Perhaps, passport signings....I doubt if it's worth an inquest but HMRC may waste a day out of the office on it....because?...... that's their way.

 

My Moneys still on WIP (uitf 40) issues and excessive wife's wages when they are not even there.......and the numbers will be significant.....legal firms always have issues with the cash flow effect of paying tax and payments on account for work they have not even billed. You would have to do this deliberately?

Wonder if we will see some criminal cases or whether they will just accept 70%+ penalties

Remember the nasty bits of the law are usually reserved for those with a position of responsibility!!

 

.    1 thanks

ireallyshouldkn... | | Permalink

A lawyer friend of mine who is a commissioner for oaths was shocked when I mentioned he should be declaring the cash fee. 

"But I have never done that" he said, "its just pub money".

And with that we had lunch. Do I have to report myself?

ireallyshouldknow,,,,,you really should know    1 thanks

may2011 | | Permalink

that they prpbably know who you are and who your friends are.

Poetic justice    3 thanks

mikefleming3028 | | Permalink

A good place to start would be the very Chambers of Barristers and QC`s who promote "avoidance schemes". Perhaps Mr Aaronson may be able to supply HMRC with some hints as to where to start, he has after all nailed his flag very firmly to HMRc`s moral  mast on this issue.

Depends on the lawyer    3 thanks

dhalsey | | Permalink

This will be interesting. There are a lot of lawyers practising advising larger companies where no cash exists whatsoever. It isn't just lawyers running offices working for Joe public.

 I would have thought the proportion of those fiddling and getting caught in the legal game would be miniscule compared to say, cash based traders.

But easier to go for the cash cows rather than reform council housing (4 bed house for life), over generous child led benefit system etc etc isn't it HMRC?

 

Can you "target" 100% of all taxpayers?

JackHarper | | Permalink

I presume that HMRC have taken advice from their General Counsel and Solicitor's Office that their actions will not be so irrational and oppressive as to be judicially reviewable.

We know that an enquiry can be opened without any reason being given but that is not the same as giving a reason that is patently absurd, e.g. you are a lawyer ergo you may well be a tax evader,.and which is widely publicised--- pejoratively.

We are also reaching the point at which so many taxpayers are being targeted that HMRC is not using its judgment fairly in selecting a given taxpayer.

Most of my clients are philosophical about meeting the costs of a long enquiry that yields HMRC nothing. These costs are exacerbated by HMRC's approach during which for the first year,say, it will demand increasing quantities of documents and answers to questions which cost a fair bit to produce (though the best-organised clients are ready). They then chew it over for a bit in correspondence at 2 month intervals and give in without a by your leave or kiss my Gawke.

It is irritating because one imagines that this is partly caused by an indiscriminate selection method of what they wish to see (probably a checklist operated by a spotty erk) and partly by their biting off more than they can chew; result one suspects that it takes 2 years to reach an overworked senior officer who realises that it will do HMRC no favours to persist. The sanctions for this in a single case are inadequate especially as clients believe that if they make a fuss they may well encounter the Tax equivalent of DI Burnside in a dark alley. They're just glad it's over and want to get on.

It is another thing to adopt this approach wholesale in relation to a large group of taxpayers identified by the possiblity that they might be at it because some people like them have been at it or perhaps have only been suspected of being at it in the past. Tax evasion is a criminal offence but if the CPS/police targeted several million people with bull necks shaven heads and tattoos all over because they might be guilty of ABH quite a lot of (even posh) people might object.

A bunch of seriously annoyed totally vindicated lawyers (costs on a DIY basis) may be a more formidable quarry than a fragmented inarticulate not very well off bunch of door supervisers and part time hit men.

johnjenkins's picture

I suppose    1 thanks

johnjenkins | | Permalink

a lawyer could take HMRC to court with a view that they are not being treated the same as other tax payers. In fact HMRC targetting trade groups rather than risk groups could be illegal. How can you compare a lawyer with a takeaway under risk assessments?

mydoghasfleas's picture

VAT inspection

mydoghasfleas | | Permalink

 I have just come out of a VAT visit.  I have known the Inspector for 15 years.  We spoke about the reason for the visit.  I issued a large credit note which spiked my figures and was enquired into at the input end.

The Inspector mentioned the system is driven by spikes causing visits.  Often the spikes were business to business with no tax at stake.  Several days of visits could have been handled by a couple of phone calls were there a system for it.  My customer had accepted an argument from one Inspector the charge was not a supply of services (which is debatable) so could not recover the tax charged.  Rather than argue we issued the credit note.  Two Inspectors, two visits, one decision no net difference.  My Inspector accepted policing is necessary but regretted the time wasted by heavy handedness.  Should I be saying this not him?

He was old school from the days when there were local tax and VAT offices; it meant they knew the patch; the local accountants; controls used by the persons involved.  Rather than going by rote through the visit questionnaire he could cut to the quick.

What is this to do with targetting particular trades and professions?  We need HMRC to launch another 5 year soviet plan; reverse shifts from local offices to county size areas, to business types and specialist groups back to local offices with a District Inspector with guidance, but not control, from above.  We could then stop being stakeholders, revert to customers and then even to taxpayers.

Also, why are these targets on different businesses in different areas.  Is HMRC saying only hairdressers in the North East are worth investigating the catering trade is not.  It's fragmented thinking and dissipation of resource.

Fish in a barrel

The Black Knight | | Permalink

This is like shooting fish in a barrel except they are not any good at that either.

The Location idea may be an acceptance that they do not have the resources to collect. (based of course on the civil service absorption cost+deficit methods rather than a marginal cost basis)

Perhaps these limited areas will raise the tax they need to spend and they can leave the other fish for another budget day?

No doubt if they could make one nail with the correct weight specified as a production target then they would?

The other areas are perhaps supposed to take notice but in reality they will all say "at least it's not us"

I suspect a lot of this is just marketing hot air...they have only prosecuted 3 out of 26? plumbers so far and we have heard nothing of the additional 600 under COP9.

An interesting move    1 thanks

KVS | | Permalink

An interesting move by HMRC indeed. We only have to wait and see how the battle unfolds between the HMRC and the lawyers. Would be quite a spectacle!

HMRC through IQOR have called

robjanderson | | Permalink

HMRC through IQOR have called me over 20 times about a tax payment which is only outstanding because of a keying error by HMRC. I wonder how much they are paying for this "service"  and how much they would save if they corrected their in house problems before they try to target legitimate businesses

X cients at £Y00 per head

Stalytax | | Permalink

If they are going to target accountants using an X clients at £Y00 per head approach, they need to sort out the current situation where I keep trying to delete ex-clients on their website, but they never go away.

As for lawyers, it might be a safe bet that those facilitating avoidance, would be using every means at their disposal to minimise their own liabilities.

KH's picture

Dave Hartnett should be next in line

KH | | Permalink

 

http://www.dailymail.co.uk/news/article-2207936/Video-HMRC-boss-Dave-Hartnett-getting-corporate-tax-dodge-award-internet-hit.html My wife spotted this wonderful post ... scroll down and watch the UTube video ... priceless.   

 

Nick Graves's picture

Priceless!

Nick Graves | | Permalink

Well, £25m ought to cover it.

Partners or employees?    1 thanks

kim walsh | | Permalink

My bet is that they go for non equity partners and try to claim employment status.

Wasn't there a recent employment tribunal finding in favour of 'sacked' partner claiming he was really an employee?

Can't believe they haven't done this before.