With a detection rate of less than 1.5%, your chances of prospering in the hidden economy are looking rosy. Even when individuals are weeded out, penalties amount to less than 3% of tax and, in 2006/07 there were only 67 prosecutions – out of an estimated 2 million evaders.

These findings were made by the House of Commons Public Accounts Committee in a report out today, entitled HMRC: Tackling the hidden economy. Basically, detection is minimal, and the situation has not improved subsequent to the recommendations made in the Grabiner report back in 2000.

Giving evidence to the commons Public Accounts Committee, HMRC’s Dave Hartnett failed to convince anyone that he or his department had a handle on the problem, which extends across all trades and professions. The Tax Evasion hotline has a backlog of calls for further investigation and it seems that just as with the backlog of unmatched SA cases and tax credits requiring manual intervention, the flagging department just does not have the resources or where-with-all to cope.

The Offshore Disclosure Facility has been deemed a success, at least by HMRC, even if it has left onlookers somewhat bemused. The results are better on paper: from a list of 400,000 bank accounts, some 45,000 people came forward bringing in around £400 million at a cost of £6 million, a return of £67 for every £1 spent. HMRC is going to expand the disclosure regime to landlords, and self-employed traders, who seem to have so far resisted various advertising campaigns to come clean and own up. Not that it is possible to measure responses to advertising campaigns with any degree of accuracy, just as it is not possible to calculate who is evading tax.

Chas Roy-Chowdhury, head of taxation at ACCA, warns: “The report recommends that the taxman’s searchlight shines on the home repair and improvement sector and buy-to-let landlords, as well as continuing to focus on small businesses, non-VAT registered businesses and employers’ compliance.

Tracking non payment of tax - by ghosts and moonlighters - is an extremely difficult job for the taxman. And it is likely to become harder in the current economic climate. In the recent Pre-Budget report, the government said that HMRC would offer tax payment deferment for up to two years. The authority now has a difficult balancing act to achieve, to chase non-payment while allowing deferment."

57 barristers were found guilty of tax fraud according to Mr Hartnett's evidence to the committee, but it seems highly unlikely that any of these went on for criminal prosecution, if a recent audit report on the Revenue and Customs Prosecutions Office is anything to go by.

HMRC's Prosecutions Office’s accounts were on the basis that counsel were not putting through all their fees on a regular basis. This practice has long existed in the bar, and is a tried and tested method of delaying tax liabilities, which also has the advantage of reducing earnings for divorce and child maintenance calculations. Tax fraud being the specialist topic that it is, very few barristers at the criminal bar are capable of prosecuting a major fraud and this expertise was concentrated in a few specialist chambers, in fact, counsel at 18 Red Lion Court accounted for over two thirds of counsels’ fees paid by the office. Presumably, any cases involving m'learned friends in “the hidden economy” were deemed too tricky to prosecute, and benefited from an out of court settlement instead.

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