Of the 18 tax campaigns run by HMRC over the past 12 years, only three remain as 'live'. Jennifer Adams considers the success rate of these campaigns and investigates whether they have been retained, albeit in another guise.
In 2007, HMRC announced a series of campaigns designed to give taxpayers the opportunity to bring their tax affairs up to date on advantageous terms – no questions asked. Each campaign targeted a specific taxpayer group or type of taxable activity. Fast-forward to 2019 and the campaigns that remain target non-declaration of income from let property, credit card sales or second income. The campaigns were intended to be 'one-offs' but HMRC is obviously of the belief that the property tax campaign, in particular, has more to go and remains in place.
However, just because a campaign is no longer 'live' does not mean that HMRC has stopped collecting under that campaign. Once officially closed, HMRC then follows with more searching compliance activity to include investigations and prosecutions.
Information quoted in an article by Abbey Tax in January 2018 concludes that “between February 2015 and March 2017, HMRC delivered nearly £25m from the ongoing pursuit of doctors and dentists in the aftermath of the tax health plan campaign, even though the disclosure opportunity closed all the way back in June 2010. During the same time frame, nearly £18m was extracted from online traders, even though the e-marketplaces campaign closed in September 2012”.
At the start of the campaign process, HMRC was pleased with their tax 'take' and issued regular updates confirming the amount of tax collected per campaign. That all stopped in 2015, as by then the majority of the campaigns had run their course. Detail as to the success rate of the campaigns subsequent to 2015 are, therefore, hard to find online. A schedule remains on HMRC's website but the figures only go to 31 July 2015.
Ascertaining current figures
Abbey Tax quotes figures released by HMRC confirming that the campaigns had generated £1.2bn by 31 March 2017, of which the let property campaign's share was £135.2m.
Moving on to 2019 and in order to obtain up-to-date data, Saffery Champness had to make a freedom of information request. The request for detail on the property tax campaign came through last week and the detail can be found on their website.
HMRC has always believed that landlords were one of the main sectors that had underpaid or did not declare in the first place. In its original announcement for the campaign in 2013, HMRC estimated that up to 1.5 million landlords had underpaid or will have failed to pay up to £500m in tax between 2009 and 2010. They must have calculated that figure somehow and it can only be via information obtained from other government departments.
In this country, you cannot sell property without the Land Registry being involved. A property is sold, registered at Land Registry and it is easy for HMRC's 'Connect' computer to check names of owners against names of council tax payers or those on the electoral roll.
However, figures obtained by Saffery Champness confirm that “in the five years since the campaign started, only 35,099 people have made voluntary disclosures to HMRC which equated to 2.3% of the individuals originally identified, while of the estimated £500m in underpaid taxes, the campaign so far has recovered approximately 17.1% (£85m) of that amount overall”.
The text does not say whether these were landlords who had approached HMRC truly voluntarily, or were those who had received a “we have reason to believe” letters. Whichever the answer, without the campaign this money might not have been collected. However, it must be said that HMRC appears to have overestimated the underpayment somewhat, and as such the property campaign cannot be said to have been as successful as first hoped.
Figures as to the cost of collection would be interesting to obtain, but it cannot be a coincidence that the property campaign continues as it must be the easiest and most cost-effective to collect being that non-disclosure is easy to trace. The property campaign, therefore, has a long way to go and could remain in place for some time yet. Every year non-compliant landlords will come out of the woodwork when they either come to sell or probate is obtained. The campaign covering second income is wide enough to cover all manner of sins and again is likely to remain.
HMRC believes that campaigns into specific sectors have had their day but that does not mean that the 'non-penalty' process is no more. HMRC's attention has undeniably been diverted to more lucrative areas of investigation, not least to offshore.
As Saffery Champness notes in their consideration, the 'failure to correct' penalty was not applied on full disclosure of an offshore tax irregularity by 30 September 2018. They also note the importance of 'The Common Reporting Standard' (CRS) being an international measure adopted by many of the leading business countries in 2017, whereby countries automatically exchange tax information about financial accounts held by non-residents. 2018 saw a marked increase in the number of countries joining the scheme.
As part of the broader work to tackle tax evasion and avoidance taskforces were launched a few years after campaigns had started, intending to sit alongside once HMRC could evaluate the success of 'targeting' specific sectors.
Taskforces remain in place focusing on high-risk sectors across the UK and this has enabled HMRC to collect in excess of £156m since 2011 from 70 taskforces. An example of the scope of the taskforces remit was detailed in Andrew Goodall's article of 23 September 2014 HMRC launches VAT taskforces in Midlands.
An example of the success rate was quoted in Richard Hattersley's article on 2 June 2016, where HMRC confirmed that its taskforces had retrieved over £540m since they launched in the spring of 2011. “The taskforces have steadily increased the amount of money brought in each year, with 2015-16 £248m money pot doubling the previous year’s yield.”
But again, these figures and comments are now at least three years out of date, and it would appear that ascertaining detailed success rates or otherwise (apart from generalisation figures) must now be undertaken via Freedom of Information requests. The only way that it was known that HMRC collected £819m in additional tax through payroll investigations in 2016/17 was again via an information request.
Whether campaigns can be said to be a success or not in terms of the amount collected, they were successful in confirming HMRC's belief that the 'tax take' was much less than it would otherwise have been. HMRC must be hoping that the experience gleaned from campaigns will come in useful when Making Tax Digital makes it easier to 'target' non-paying ‘customers’.
About Jennifer Adams
Jennifer Adams is Consulting Editor of AccountingWEB and is a professional business author specialising in corporate governance and taxation. She runs her own accounting and consultancy business with offices based in Surrey and Dorset.