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HMRC to tighten investigation net

17th Mar 2011
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A House of Commons committee report on HMRC’s civil investigations praised the department for improving its performance in difficult circumstances, but highlighted concerns about morale, management direction and achieving more strenuous post-Spending Review targets.

Following up the NAO report on civil investigations in December, the Commons Public Accounts select committee took further evidence from HMRC officials. Both the report and committee chair Margaret Hodge MP praised HMRC for increasing yields with fewer resources.

“The two directorates in HMRC responsible for civil investigation work brought in £8.5bn of tax revenue in 2009-10, nearly 50% more than the total three years before. At the same time they reduced spending by 10%,” said Hodge.

“This was good progress and we welcome that. But the department now has a much more stretching target. Government spending plans require HMRC to bring in an extra £18bn of tax revenue over the next four years while reducing its costs.”

However a lack of detailed information on the costs and returns of different enforcement activities will hamper these efforts, she added. As the report amplifies, HMRC has only a limited understanding of the performance and capability of its various investigation teams: “Without this information, the department cannot decide how best to deploy its resources.”
While Hodge congratulated HMRC managers for improving the collection performance, Conservative MP Stephen Barclay laid into Mike Eland, HMRC director general for enforcement and compliance:  “The thing that sings out from the [NAO] report to me is… you’ve got work ongoing to strengthen the management of resources; you’re about to roll out a case management system; you’re developing a resource allocation model; you don’t have an effective system for escalating cases and it says the department is ‘in a transitional phase’…

“Six or seven years after you’ve started in post you’re about to do a whole load of things to improve this and the department is in a state of transition.

Exchanges with Barclay and Labour MP Austen Mitchell highlighted continuing problems with morale. Eland could not hide the results of HMRC staff surveys, but explained to the MPs: “Their frustration is sometimes with things that they regard as bureaucratic processes, and I have to look at those and see whether they are genuinely bureaucratic processes or whether actually they are management systems that are constraining some of their activity in ways that are beneficial.”

The Public Accounts Committee did, however, uncover plans to tighten the referral criteria for civil investigations. According to the NAO, only 20% of cases referred to dedicated investigation teams were adopted, which caused disillusionment among caseworkers.

HMRC has also confirmed that it plans to undertake a fivefold increase in criminal prosecutions increasing the tally from 200 at present to 1,000 going forward. This will be backed up by a new prosecution policy which will be published this April.

James Bullock, partner at McGrigors, said: “HMRC has offered the ‘carrot’ of the amnesties. This is the proverbial ‘stick’. Over the last few years HMRC has concentrated on prosecuting fairly ‘low level’ cases within the informal economy. It seems that they will now take on bigger and more complex cases. The question is how they will increase prosecutions by 500% without pursuing marginal cases that would be better resolved by civil settlement. Evasion can be notoriously difficult to establish and inevitably some innocent taxpayers could get caught up in the trawler net.”

McGrigors says that HMRC’s new strategy is likely to focus on prosecuting individuals in three key areas:

  1. Professional advisers committing or promoting fraud
  2. Taxpayers who have already reached a ‘civil settlement’ and offend again
  3. Taxpayers with substantial amounts offshore which is undeclared and who have not made a disclosure under one of the tax ‘amnesties’

Out of an annual average of around 4,000 cases, the number of referrals fell from 380 a month in 2007-08 to 330 a month in 2009-10 (though that figure has now recovered, HMRC said).

Donald Toon, HMRC director, Central Compliance, told the MPs the department planned to “relaunch” the system with new criteria for referral in April.

“What that’s trying to do is really to be rather more specific about cases that are more likely to require take-up by some form of specialised investigation, whether that be criminal or civil investigation,” he said.

Which the current process was introduced in in 2007, HMRC set low criteria for referrals to boost case numbers to help build up its “central intelligence picture” of the structure of potential fraud. Without mentioning any specific changes, he said, “We have not changed those criteria; what we have done is tighten up those criteria.”

At the NAO and MPs’ prompting HMRC will also introduce a new set of performance measures in 2011. Among these will be a measure of the amount of extra tax actually collected as a result of compliance work, not simply the amount identified as owing.

Replies (12)

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By billgilcom
17th Mar 2011 11:42

Staff Morale

Looks like a recipe for disaster with HMRC ground troops being tasked to find more cases with a more realistic measure of the tax actually reaped from the enquiry compliance effort.

Potentially more CIF or Criminal Tax unit cases to come from April then

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By johnjenkins
17th Mar 2011 15:20

£26.5Bn tax to be collected (8.5 + extra 18)

from where???????????? Creative taxation. This will be fun to watch.

Mind you HMRC have already started to use outside collection agencies. So we know where all the sacked staff are going.

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By frankdavid
17th Mar 2011 16:46

Would you run a chip shop like this ?

" However a lack of detailed information on the costs and returns of different enforcement activities will hamper these efforts, she added. As the report amplifies, HMRC has only a limited understanding of the performance and capability of its various investigation teams: “Without this information, the department cannot decide how best to deploy its resources"


 It beggars belief

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By mwaccountants.
21st Mar 2011 11:24

HMR&C investigations

We were all expecting this!

We recommended to all our clients that they take out fee insurance, and I am pleased to say many have.



West London


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By P&G
21st Mar 2011 12:03

New HMRC investigations levels

There is an underlying issue here that has not been addressed, namely adequate training of staff to do the job properly. If the staff were doing theirs jobs properly then enquiries would run much faster, we wouldn't get caught up in official complaints and the Adjudicators office would not have over a year's worth of complaints sitting waiting for a repsonse. If the cases run faster then they are concluded faster and any additional tax is paid sooner.

The word "bureaucratic" was used as if it's just the fault of the top brass, as practitioners we all know that's not true, other than the most isolated cases. The whole of HMRC requires a complete top to bottom review by external consultants, the results, would, I'm sure, not only reduce the staff to sensible levels but would also streamline the whole process, which would no doubt increase tax take. 


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By Carol at TRC
21st Mar 2011 13:32

Insured or not insured!

Hi Andrew, I was always nervous about recommending insurance products to my clients.  How does it work from the practitioners point of view?

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By daveah
21st Mar 2011 19:55

Insurance from practitioners point of view

Hi Carol

I have just taken out insurance with Taxwise on a Small Practitioner plan, and assuming that all your clients are in the UK it seems to be a great deal. Without going in to the minutiae, it is the practice that takes out the insurance which is then disbursed or re-sold to your clients.

When there is a claim, the practtitioner makes it rather than the client, and this can be done on-line.

The Business Development Manager I met with is called Ross Jenkins and his contact details are as follows:-

email [email protected]

Mobile 07837 568925

Office : 01455 852550

Fax: 01455 852599

This guy was not pushy, or into pressure selling and to cover up to 25 clients cost £900. My insurable clients are seeing the sense and I will not be out of pocket on the deal even thoough being an altruist, I am disbursing at cost.

Hope this is useful

Dave Harper

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By greybeard
22nd Mar 2011 12:49

Big is Bountiful

Recent article from Private Eye magazine proving that life for large companies at the hands of HMRC is a lot cushier than it is for everyone else...

"Three years ago, parliament's public accounts committee criticised the taxman's failure to extract penalties from tax dodging multinationals after learning that companies dealt with by its large business service were penalised "in only 19 cases, totalling £ 15m". This was around 0.6% of under-declared tax and HMRC promised to try harder in future.

Figures obtained by the Eye under freedom of information law show that the position is now dramatically worse. In 2009/10, just six penalties were charged totalling £442,000; and as this financial year draws to a close, "fewer than five" penalties have been charged for just £322,000. These figures represent less than 0.01% of tax under-declared. The rate for smaller businesses is about 200 times higher.


Treasury select committee chairman Andrew Tyrie said last week that HMRC was "close to being a failing institution" in light of other [***]-ups. When it comes to taxing big business, it's already there."

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By mwaccountants.
23rd Mar 2011 10:01


Hi Carol,

We, like Daveah below, have used Taxwise. Found them good.

We "buy" their insurance put on our mark up, and sell it to the client.

We infomed our clients that we are getting "commission"

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By markfd
25th Mar 2011 06:09

Big Business and Tax Penalties

The point about this is that penalties only arise if a person has been negligent, something HMRC conveniently tries to overlook most of the time.  In that context it's not at all surprising that "big business" does not pay much by way of penalty because for the most part their returns will have been prepared by professionals.  So although there may be disagreements on treatment of items with the Revenue which give rise to an agreed settlement, most businesses would litigate before admitting negligence.  I certainly would.

It's a bit depressing seeing this type of UK Uncut anti-business nonsense spreading into AccountingWeb.

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By Joss
27th Mar 2011 16:36

Big business getting off lightly & Investigation protection insu

I agree if I was HMRC I would think twice before accusing a multinational of negligence - much easier to target/ bully smaller businesses who do not have their own tax/legal departments. I suppose there is some mileage in the fact that they have to know that there is a strong probability of winning the case before they take it on otherwise,  if HMRC lost, the legal fees and court costs could be high and ultimately we all foot the bill for this. But really if HMRC don't stand up to big business surely they set a precedent. It is a tricky balance but the above reported figures suggest to me that HMRC are increasingly going for soft targets. And the balance is seriously out of kilter.

For fee protection insurance I direct my clients to the professional contractors group My number of clients is small and the mark up on insurance policies would barely cover my admin costs (I checked it all out with Abbey Tax). Plus they (the insurers) really want ALL your clients signed up. Otherwise the price goes up. So I pass the business directly to PCG. They deal with sole traders and small companies - specialising in close service companies including some now legendary ones in the tax world.

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By Joss
27th Mar 2011 16:43

Professional Contractors Group webpage

I just checked. The following link is better. Should I be claiming commission??

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