Why we started this group
The starting point for this discussion group is our AccountingWEB Taskforce tracker, which contains the data HMRC has given us on the 20 campaigns undertaken so far as part of its wider remit under the 2010 spending review to reap £7bn in increased tax revenue by 2015. More than £900m is being invested in this initiative, which means we'll be seeing a lot more investigations, many of which are taking place under the umbrella of 20-30 planned task forces and campaigns targeting specific industries and sectors. A desire to assess how well these campaigns are working, and how they are affecting UK businesses was the trigger for this group.
On closer examination, we found that HMRC's figures are not very comprehensive, nor complete, which is one of the issues the NAO picked up in a report last year. We want to draw on community input, HMRC/NAO stats and expert advice to piece together a much more detailed assessment of how many checks have been carried out, what proportion have led to disclosures, and some solid figures to assess the amounts of tax raised.
And taking a step back, we want to examine the effect the new enforcement & compliance philosophy at HMRC is having on ordinary businesses and their advisers. For both aspects of our ongoing investigations, we want your help. Many hands make light work and any further information you can give us on investigations that you have experienced, relevant tribunal decisions, HMRC’s patterns of behaviour and failure/success rates will be of great help for those caught up in tax enquiries. If you run across any relevant documentation or commentary, please alert us about it here. That’s what Nick Huber (our reporter on the subject) and the rest of the AccountingWEB team will be doing.
Below are some discussion points to get you started:
- How many people has HMRC put into the taskforces? How much is being spent, and how realistic is the £900m target set in 2010 spending review?
- Success rates – businesses reviewed, how many have made disclosures, how many prosecuted and how much have they paid up?
- To what extent is the enforcement programme diminishing in effect as HMRC's teams work their way beyond the low-hanging fruit?
- Business impacts – how many companies are being worried and is this turning into a cynical and heavy-handed cash extraction exercise?
- Large Business Office – Why does the enforcement programme seem to focus primarily on individuals and small business people? Are there not significantly larger sums at risk from larger businesses, and is LBO or any other branch of HMRC pursuing these opportunities with the same vigor as small business-focused task forces?
- Are we seeing practical impacts of HMRC’s new powers as part of these tax campaigns? Is HMRC pushing for extra amounts due to lack of reasonable care?
- What negotiation techniques are they using? For example, are they using new dispute resolution processes?
- Is the new penalty regime coming into play in negotiating settlements?
- Do practitioners/advisers need to adjust their strategies in the face of this onslaught?
- What’s happening with COP9 investigations: rising or falling, and what are the danger signals for accountants that an investigation into their client might turn ‘criminal’; how should they act?
Have we missed anything else out? Add any topics you think we should be address by commenting below. If you want to chew over any of the questions raised, could you please do so by adding to or starting your own separate thread so that the advice and comments we collect are organised to be as helpful as possible to other members of the group.
TIME SPENT BY THESE GUYS
"I think another aspect to be considered is the degree of expertise brought to bear. As an example a current enquiry I have on the go is for a business that is patently making losses under the management of a trader who is completely out of their depth. The Inspector seems to be convinced that extraction of takings prior to recording is taking place and that payments to staff are taking place without deductions. I had to point out that a PAYE scheme was in operation, something he was entirely unaware of.
If he had bothered to attend the premises he would have seen that business was poor and turnover levels were obviously low. When it was disclosed that the family had loaned money to the business he wanted to know the source of these funds despite being aware that the spouse had other earned income. A little bit of thought would have suggested that if funds were being introduced to meet expenditure then it was highly unlikely that profits were being earned. Instead the reaction was to assess profits such that a £46,000 tax charge was made. I dread to think how he will react when he sees revised accounts showing losses and that I will be putting in for a tax refund with an interest claim, and if it was possible penalties for utter stupidity. This case will eventually cost the taxpayer and the revenue thousands and bring in no funds to the exchequer.
The real point is that before undertaking an enquiry, intelligent questioning and observation should take place first. Don't let prejudice cloud judgement, keep an open mind. Limit the costs at risk to maximise returns to the exchequer."
there is a huge lack of "focus"/"big picture"/"strategic" understanding among the bods still slaved with conducting tax enquiries who have not been let go.
this was admitted by an officer of HMRC ALTERNATIVE DISPUTE RESOLUTION team who we were able to speak to face to face at our office after looking at one of 3 recent motor trader tax enquiry cases we have had....... averege time spent by ADR 14 staff hrs/average time under the normal enquiry process can be over 200 hmrc staff hours....QED
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I think another aspect to be
I think another aspect to be considered is the degree of expertise brought to bear. As an example a current enquiry I have on the go is for a business that is patently making losses under the management of a trader who is completely out of their depth. The Inspector seems to be convinced that extraction of takings prior to recording is taking place and that payments to staff are taking place without deductions. I had to point out that a PAYE scheme was in operation, something he was entirely unaware of.
If he had bothered to attend the premises he would have seen that business was poor and turnover levels were obviously low. When it was disclosed that the family had loaned money to the business he wanted to know the source of these funds despite being aware that the spouse had other earned income. A little bit of thought would have suggested that if funds were being introduced to meet expenditure then it was highly unlikely that profits were being earned. Instead the reaction was to assess profits such that a £46,000 tax charge was made. I dread to think how he will react when he sees revised accounts showing losses and that I will be putting in for a tax refund with an interest claim, and if it was possible penalties for utter stupidity. This case will eventually cost the taxpayer and the revenue thousands and bring in no funds to the exchequer.
The real point is that before undertaking an enquiry, intelligent questioning and observation should take place first. Don't let prejudice cloud judgement, keep an open mind. Limit the costs at risk to maximise returns to the exchequer.