HMRC cracks down on suspected tax fraud

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Nick Huber
Freelance journalist
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A new “amnesty” facility by HMRC to tackle suspected tax fraud using civil powers has been welcomed by the Chartered Institute of Taxation (CIOT).

Under the Contractual Disclosure Facility (CDF), which will start on 31 January, HMRC will offer some people suspected of tax fraud the opportunity to disclose that fraud in exchange for a guarantee that they will not face criminal prosecution.

HMRC will write to a taxpayer to inform them that they are suspected of serious tax fraud and offer them the opportunity to enter into a contract to disclose that fraud within 60 days.

In return for people coming clean about money owed, HMRC will agree not to make a criminal prosecution. Instead the taxpayer will typically pay a financial penalty, plus interest and tax owed.

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13th Jan 2012 11:24

Again HMRC and government

are choosing to bypass the law of the land. So the rich get a "get out of jail" card all because HMRC can't or won't do their job properly. If there are that many fraudsters then something must be drastically wrong somewhere.

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16th Jan 2012 08:59

Sorry, but I fundamentally disagree with this.

If people have been guilty of serious tax fraud, then they SHOULD, indeed MUST be prosecuted.

This is just a license for those intent on deceiving the state of its rightful taxes to have a 'get out of jail free card'. We're not playing Monopoly here, this is very serious.

If we go down this route, then we are in danger of becoming like Italy and Greece where those who are able to (i.e. not on PAYE for 100% of their income), will under-declare their incomes as long as they are able to get away with it.


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16th Jan 2012 10:36

I agree where is the risk

wait until you are caught....the cash flow advantages of not paying your tax are so good you could have made ten times the penalty by the time you are caught....make it look innocent with some bad advice (perhaps from HMRC) and you are home and dry...

It is already efficient to wait for a pathetic investigation....many are still much better off after the investigation.....HMRC will miss most of the unpaid tax................unless there's nothing to find then you will be running around for months...whose side are HMRC on anyway ?

Criminals should be prosecuted not made to sit on the naughty step for ten minutes..

Why is this different to COP9 ? just the 60 Days ?

I do think HMRC have moved into the business of creating newspaper articles instead of dealing with tax evaders............nothing will happen as usual...

Have we even seen a deliberate defaulter listed yet ? presumably there have not been any !

And have certainly not heard of any increase in investigations (unless its from fee protection salesmen)

I have seen a lot of missing tax that HMRC cannot be bothered to collect though !

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16th Jan 2012 10:39

Something and nothing

This is a storm in a teacup.  The "Contractual Disclosure Facilty" is not substantially different from the practice that has been adopted by HMRC in cases of suspected tax fraud for years, going back to the "Hansard Extract" of Enquiry Branch days.  The only significant changes are (1) Instead of a "nod and a wink" that a taxpayer can avoid prosecution by making a full and complete disclosure there is a formal contractual agreement to that effect and (2) The enormous resource cost of an initial disclosure meeting, typically taking up most of a day, is replaced by a much more efficient process.  To describe this an an "amnesty" is utterly misleading - admitting to tax irregularities under the CDF will result in payment of all tax due, plus interest, plus a negotiated penalty.  

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16th Jan 2012 11:14

HMRC Investigations

The problem here is that HMRC have so fundamentally crippled their capability for undertaking investigations in an efficient and cost effective manner (mass loss of tax expertise, closure of local offices, etc.) that they are now reliant upon scaring those guilty of tax fraud / evasion into coming clean.

The reason for this is that they no longer have the capacity for undertaking routine enquiries and those enquiries have to be cost justified (i.e. even if there is nothing underhand, find something or allege something so you can get a "Successful investigation").

This is not about ensuring the taxpayer pays the right amount of tax (no more, no less), but rather justifying the costs of maintaining an enforcement team of inspectors.

Provided an evader stays away from areas of buiness which require electronic transactions and records, they are more likely to get away with this than ever as there are no 'troops on the ground' to discover these 'black enterprizes'.

I was recently visiting one of my clients at a traditional victorian industrial estate which had now been converted into small commercial units and it was pretty obvious that a lot of the businesses were fly-by-night operations, mostly related to scrappage, recycling and repairs. In the past inspectors would have periodically visited such places to ensure that they were operating legitimately and put the fear of good into chancers who thought they might turn a few quid in undeclared income.

Nowadays, the likelihood is that such business can (and will) operate with impunity for as long as their owners wish without any chance of discovery. Provided that the evader is careful what they do with the cash to ensure no electronic audit trail is created (like depositing it or purchasing a property with it, etc.), then they can get away with it.

It seems to me that HMRC have transformed themselves into little more than a contact centre for automatically collected taxes (PAYE, VAT, Corporation Tax, etc.) that they are essentially ignoring traditional 'black market' evasion. This is a very serious mistake, especially in a time of rising taxes, rising costs and falling standards of living.

If evaders are seen to get away with it, or when caught get little more than a slap on the wrist, then evasion will grow-and-grow.

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16th Jan 2012 11:52

Is the real difference

an admission of Guilt in return for tea and biscuits.......

but penalties start in the 70%-100% zone ?

HMRC really needs a shake up...or may as well just go home for all the use they are.

They could easily close the tax gap by

1. Better targeted enquiries ....towards tax evaders not a scatter gun approach against an industry which we have seen recently and has quite appalling results.Was not a success at all as reported.

2. Making use of information they the moment a MLR is a guarantee an investigation will not happen.

3. Boots on the ground.

There must be a deliberate reason why tax evasion is not being dealt with !

But I guess it's the same reason drug dealers are allowed to drive around in the latest Audi's but have never had a job in their lives.(other than for parole reasons)



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