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Tax evasion is rife, accountant warns

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24th Sep 2014
Freelance tax writer
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Earlier this week the union representing most HMRC staff claimed that tax evasion is costing more than £80bn a year, an estimate dismissed by HMRC. A chartered accountant has now warned that tax evasion among micro businesses in the UK is “rife”, and that politicians must address HMRC staff levels. But the department told AccountingWEB that its “drive against the cheats” benefited from excellent intelligence and dedicated staff.

Richard Murphy’s latest report for the PCS has reignited the tax gap debate, and Ed Miliband told the Labour Party conference yesterday that a Labour government would raise £1bn a year through tax avoidance measures as part of a £2.5bn package to fund a transformed NHS.

But Jolyon Maugham, a tax barrister and Labour Party supporter, noted that on personal tax avoidance “the heavy lifting is done”. On corporate tax avoidance, he said we must “await development and implementation of the OECD’s BEPS project”.

“The battleground is moving to evasion,” Maugham wrote on his blog yesterday. “On this front, I think the Conservatives’ record is less compelling. Tackling evasion is inevitably manpower heavy and I cannot see how HMRC’s capacity to close the tax gap in that field can have survived the significant cuts in HMRC staffing levels.”

‘Open house’

Responding, Kendal-based chartered accountant Stuart Jones wrote: “I can only comment on the microbusiness sector but evasion is rife. A tax office in every large town meant that HMRC staff saw what was happening locally. Nowadays it’s open house for evading VAT, income tax and national insurance contributions (while at the same time overclaiming tax credits) by being part of the cash economy. Businesses never register with HMRC, companies are struck off without any objections from HMRC, the list is endless.”

Jones added: “Politicians must address HMRC staff levels immediately.”

He told AccountingWEB today that HMRC “has all the tools to tackle evasion, but doesn’t have the staff”.

Tax gap

PCS general secretary Mark Serwotka said in a foreword to Murphy’s report that tax evasion might cost the UK “£85bn a year”. The report examines areas that HMRC’s own estimate does not address, said Murphy, director of Tax Research UK.

A report that he published earlier this year suggested that “up to 10%” of UK sales income may not be recorded. In 2011/12 this was likely to have represented £100bn of unrecorded sales income in the “shadow economy”, he said. Unrecorded tax of “maybe £40bn” may have gone unpaid.

In addition, HMRC had estimated almost £12bn of revenue losses for criminal attacks, error and failure to take reasonable care. Murphy estimated “further tax gaps” amounting to more than £21bn in relation to “fraud and other crime, capital gains tax and inheritance tax under-declaration, and offshore tax evasion”. His estimate of the total “tax evasion gap” for 2011/12 was £73bn.

HMRC’s estimate of the tax gap for that year, published last October, attributed revenue losses of £22bn to error (£2.9bn), failure to take reasonable care (£4.3bn), evasion (£5.1bn), the hidden economy (£5.4bn) and organised criminal attack (4.7bn). The total tax gap was put at £35bn.

An HMRC spokesperson told AccountingWEB yesterday that the PCS tax gap estimate was “over-inflated, flawed and muddled”, and that the department would “continue to exert maximum downward pressure on the tax gap”.

Tax professionals backed the coalition government’s decision in 2010 to earmark £900m over the spending review period to tackle avoidance and evasion. The Chartered Institute of Taxation welcomed “an increased emphasis” on evasion.

“Tax evasion is a much bigger issue than tax avoidance,” Murphy wrote today. “In that case why isn’t it being tackled? What is the problem in saying tax evaders are cheats? And that they undermine the NHS? And education? And pensions?”

HMRC response

“Tax evasion makes up £5bn of the total tax gap of £35bn,” HMRC said.

A spokesperson added: “Effectively tackling evasion requires excellent intelligence, sound risk analysis, resource flexibility, and dedicated staff. Our drive against the cheats enjoys all these things.

“Since 2010 our drive against tax dodgers has helped deliver around £60bn of additional tax to the exchequer. Last year alone we brought in over £23bn from compliance work.

“Specific programmes such as our Managing Serious Defaulters project subjects identified rule breakers to increased scrutiny, and makes public some of the worst offenders.”

Replies (35)

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By mikefleming3028
24th Sep 2014 15:02

Governments "Rat on a Rat" campaign

Has anyone at HMRC bothered to look at Section 32 of IRRA 1890 which states:-

"The Commissioners may at their discretion reward any person who informs them  of any offence against any Act relating to inland revenue or assists in the recovery of any fine  or penalty, provided that a reward exceeding £50 shall not be paid in any case without the consent of the treasury"

Given the push on detecting tax evasion and the recent possible  changes on rewarding and protecting  whistle blowers I would have thought that an advertising campaign featuring this particular "opportunity" would be taken to heart in certain sections of the community. ie no new taskforces necessary and shed loads of information flooding in to HMRC from interested parties. Sounds like a win win deal to me... 

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Replying to Lsamuels:
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By thehaggis
24th Sep 2014 23:05

CRCA 2005

mikefleming3028 wrote:

Has anyone at HMRC bothered to look at Section 32 of IRRA 1890 which states:-

"The Commissioners may at their discretion reward any person who informs them  of any offence against any Act relating to inland revenue or assists in the recovery of any fine  or penalty, provided that a reward exceeding £50 shall not be paid in any case without the consent of the treasury"

Given the push on detecting tax evasion and the recent possible  changes on rewarding and protecting  whistle blowers I would have thought that an advertising campaign featuring this particular "opportunity" would be taken to heart in certain sections of the community. ie no new taskforces necessary and shed loads of information flooding in to HMRC from interested parties. Sounds like a win win deal to me... 

 

They looked at it in 2005 when the whole act was repealed by CRCA 2005

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By Justin Bryant
24th Sep 2014 15:24

I am surpsied at

How seriously some people take Mr Murphy. He thinks the sponge bob plan is evaiding billions in taxes, but that must be nonsense as even a very dumb tax fraudster should know that using that "bottom of the harbour" tax evasion device is worse than useless compared to simply not registering your name etc. at companies house and simply using any old bank account and not declaring cash takings and thus not having a “red dot” on your file as a former company director/shareholder. See amusing comments in link below: http://justicefortaxesnetwork.wordpress.com/about/

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By Lancaster
25th Sep 2014 09:51

HMRC's own fault

Successive governments and HMRC have brought this on themselves. The simple fact is that ordinary people see almost daily reports of large corporations being allowed by HMRC to avoid huge amounts of tax, they see reports of "sweetheart deals" between HMRC and large companies such as Vodaphone, and this breeds a totally understandable attitude of "if it's Ok for them not to pay ........... "

 

 

 

 

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By JohnRP
25th Sep 2014 10:32

Quality not quantity

 

HMRC has plenty of staff, but the quality is poor and the work ethic is missing.

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Replying to Wanderer:
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By Ken Howard
25th Sep 2014 11:07

Loss of local knowledge is the prime culprit

JohnRP wrote:
 HMRC has plenty of staff, but the quality is poor and the work ethic is missing.  

I fully agree, but also agree with Stuart's point about loss of local knowledge.  

When I started, 30 years ago, it was common for a new start up business to receive a letter from a local inspector to ask them when they started, their legal status, etc.,  This was prompted simply by the local tax office staff noticing a neighbour with a new tradesman van parked outside their house, or a new shop that had opened up, or from trawling the local newspaper and shop windows for adverts.  There was no need for "task forces" etc.  It was very rare indeed for a new client to come in to get their accounts done that hadn't already been approached by HMRC.  It was local pro-activeness.  The same applied with tax investigations.  One of our local inspectors would pore through the deaths columns and make copious notes about who's died, where they lived, which undertakers, which florists, etc., and then use that information after a few years to cross check against the records of the old folks home, the funeral directors, florists, etc., to check for unrecorded income.  Another inspector sit in various pubs counting the number of times the vending machines and pool table was being used, etc., and again cross checking against the cash book a year or more afterwards.

HMRC closed the local offices and lost that valuable link.  My clients, in Lancashire are dealt with by the Dundee CT office.  A tax inspector sat in Dundee has no local knowledge of Lancashire and we end up with stupid investigations and having to explain local matters that would never have got to enquiry stage with a local inspector.  Such as having to point out that Morecambe was a seaside resort hence higher turnover in Summer (what a surprise!!).

We also have the problem of poor knowledge.  I recently had an enquiry on a small company with a massively overdrawn directors loan account, but with no BIK and no 25% tax paid.  The inspector asked all kinds of detailed questions about the sales, expenses, etc., but despite being given the full accounts which to anyone with a remote knowledge of accounts would show an overdrawn loan account, they didn't spot it and closed the enquiry.  That could have been rich pickings, but the inspector just didn't have the real knowledge to know what they were looking at.

Do the call centre workers routinely report back when they see a new business start up?  Do they even care about tax evasion or are they just drones who answer the phone and press keys on their keyboards?

 

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Replying to WallyGandy:
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By John MacDonald
26th Sep 2014 15:55

Local knowledge

Ken Howard wrote:

JohnRP wrote:
 HMRC has plenty of staff, but the quality is poor and the work ethic is missing.  

I fully agree, but also agree with Stuart's point about loss of local knowledge.  

When I started, 30 years ago, it was common for a new start up business to receive a letter from a local inspector to ask them when they started, their legal status, etc.,  This was prompted simply by the local tax office staff noticing a neighbour with a new tradesman van parked outside their house, or a new shop that had opened up, or from trawling the local newspaper and shop windows for adverts.  There was no need for "task forces" etc.  It was very rare indeed for a new client to come in to get their accounts done that hadn't already been approached by HMRC.  It was local pro-activeness.  The same applied with tax investigations.  One of our local inspectors would pore through the deaths columns and make copious notes about who's died, where they lived, which undertakers, which florists, etc., and then use that information after a few years to cross check against the records of the old folks home, the funeral directors, florists, etc., to check for unrecorded income.  Another inspector sit in various pubs counting the number of times the vending machines and pool table was being used, etc., and again cross checking against the cash book a year or more afterwards.

HMRC closed the local offices and lost that valuable link.  My clients, in Lancashire are dealt with by the Dundee CT office.  A tax inspector sat in Dundee has no local knowledge of Lancashire and we end up with stupid investigations and having to explain local matters that would never have got to enquiry stage with a local inspector.  Such as having to point out that Morecambe was a seaside resort hence higher turnover in Summer (what a surprise!!).

We also have the problem of poor knowledge.  I recently had an enquiry on a small company with a massively overdrawn directors loan account, but with no BIK and no 25% tax paid.  The inspector asked all kinds of detailed questions about the sales, expenses, etc., but despite being given the full accounts which to anyone with a remote knowledge of accounts would show an overdrawn loan account, they didn't spot it and closed the enquiry.  That could have been rich pickings, but the inspector just didn't have the real knowledge to know what they were looking at.

Do the call centre workers routinely report back when they see a new business start up?  Do they even care about tax evasion or are they just drones who answer the phone and press keys on their keyboards?

 

I completely agree. The answer to both of your questions is no.
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Replying to Wanderer:
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By John MacDonald
26th Sep 2014 15:51

Work ethic

JohnRP wrote:

 

HMRC has plenty of staff, but the quality is poor and the work ethic is missing.

I would disagree with your first point, agree with your second and partly agree with your final point. You are right about HMRC's staff missing work ethic, but given that productivity in this country has never been higher than it was during Mr Heath's Three Day Week - either before or since - I think we all have to take a long, hard look at ourselves.
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Time for change
By Time for change
25th Sep 2014 11:45

The Police are in a similar situation

when they were a presence, in towns and cities good "coppers" would be the eyes and ears of the locality. Without knowing it, society was more at ease.

Now, it seems that the hierarchy are more interested in the instant fix of speed camera's and other nprc/cctv technology and proper policing is a thing of the past. No matter what the statistics say, less (reported crime) doesn't necessarily mean more (reduced crime that is) .

Without being rude and disrespectful good quality training is seriously lacking in all walks of public service these days but, there again, what do I know?

 

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By johnjenkins
25th Sep 2014 11:45

More Nonsense

from the fantasy figure download site.

This must be the "silly season" for fantasy figures because they seem to be on a lot more threads than usual.

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By sanjay100
25th Sep 2014 12:21

sad but true

People who I meet are so open as well about taking cash and not even trying to hide it.  There is no longer the fear factor.  HMRC have been gradually weakened with poor qualified staff who are even more demoralised with the job cuts and more pressure.  If you are expecting your staff to do  the job well then remunerate them fairly with good working conditions. Who would want to work for such an employer ?

When I have dealt with enquires what I find surprising is the lack of interest from the HMRC staff who turn up.  They just want to spend an hour at the office ask some basic question then want to go home (not back to the office).  

I would want HMRC to spend more time on the road checking on certain professions which blatantly evade tax.  I would also like to see HMRC employ qualified accountants and Tax consultants (pay them well) instead of junior clerks. More qualified personnel could well end up with much more tax as they would know what to look out for,

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By justsotax
25th Sep 2014 13:27

well at least the cash

is likely to be spent in the local community - probably a more efficient way of redistributing wealth than via central government, where after everybody takers their cut leaves an extremely small amount for the local community.

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By vince8
25th Sep 2014 16:09

I am not an accountant but I sometimes wonder

An accountant prepares the annual accounts from the information provided by the self employed client and unless he has any reason to suspect any wrongdoing the jobs done. The accountant then prepares the tax return and the client approves it (because the accountant prepared it so it must be correct). The client is hardly likely to say, hang on those accounts are rubbish so I cannot approve this.

Put the client alongside an employee earning the same and compare. The self employed man has just had a new kitchen, enjoys foreign holidays and his kids go to private school. The employee struggles to afford the loan repayments for his kitchen, has a weeks holiday in a caravan in Wales and his kids go the local comp. How many accountants know their client well enough? How many times have I heard it said "how can he afford to live down there on what he earns". He's not evading much but its enough to put him well in front of the employee on fixed deductions for tax and NIC. When multiplied by another say 1 million it soon adds up.

Its a fact of life that tax evasion is rife.  Its no good saying HMRC have not got the staff (good or bad). We all know that but should you be doing more?

 

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By johnjenkins
25th Sep 2014 16:32

@vince8

As you stated you are not an Accountant. By the content of your post you are either trying to wind us up or you have no idea what this thread is all about.

Let's rip your post apart.

Firstly you are not an Accountant and are never likely to be one if that is the way you would prepare accounts. The client may not say that the accounts are rubbish but the Accountant would certainly say these figures you gave me don't stack up. Have you ever met a real Accountant or do you actually know what an Accountant is or does?

The self-employed person, sometimes, enjoys a better lifestyle because they are prepared to work 24/7 if necessary, whereas the good old PAYE knocks off at 5 and you can bet your sweet life is clock watching come Friday pm.

I could go on and on and on and on.

In conclusion you have no idea what you are posting about and really should find somewhere else to bleat, perhaps HMRC. They all think everyone is at it.

 

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By justsotax
25th Sep 2014 16:43

slight contradiction..

'he's not evading much' and 'new kitchen, foreign holiday....kids in private school'.  To do that the evasion will be on a scale that will be visible....and at the very least raise suspicion.  But no point in comparing to employee - same rules for claiming expenses do not apply so in the event (all other things being equal) a self employed will always be better off than employee (if on same gross income....but no doubt with a level of uncertainty that an employee would have nightmares over).

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By vince8
25th Sep 2014 17:27

Oh dear Johnjenkins

What a reaction, to be expected I suppose. I'm sure you do your best for your clients but I have seen so much tax evasion, even from people represented by the most able, but I base my statements on 47 years experience. 18 years in HMRC, 23 years in a big 4 firm and the last 6 on my own in personal tax.

I should perhaps have said both self employed and the employee had the same income after deductions, not the same gross. Its just my opinion but thanks for your contribution.

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Mark Lee 2017
By Mark Lee
26th Sep 2014 08:13

Too few investigations

Little has changed in the ten years or so since I was Chairman of the ICAEW Tax Faculty and I shared my view on this issue with a senior HMRC official. 

I said that tax evasion would grow unless HMRC reinstated their investigations at the level; they were pre the advent of Self Assessment in the late 1990s. Since then hardly anyone has cause to complain to friends and family about suffering tax investigations. More people boast about what they get away with and thus, effectively encourage others to follow suit.  This will continue until and unless there are far more regular and routine tales in pubs and clubs of people being caught  and punished.

I'm not sure much has changed.

 

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By johnjenkins
25th Sep 2014 21:24

@vince8

Obviously you don't do best for your clients. Having spent 18 years in HMRC  that goes someway to explain your attitude to the self-employed. 23 years in the big 4, well that would explain your attitude towards real Accountants.

Of course you will get a reaction if you slag my profession. Methinks you're a number cruncher, no wonder Mark has come out in your defence.

@Mark. When was the last time you went down the pub and heard people bragging about how they evade tax? Years ago, yes, but not now. You're wrong, Mark. things have changed and not for the better. Why do you think the BOE haven't put interest rates up yet?

Of course there is evasion, but nowhere near the scale bandied about. Perhaps it's these fantasy figure people that are spreading these tales in the pub.

Disclaimer

My post is not meant to be a personal attack against Mark or Vince, merely an odservation based on their posts.

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Replying to Tim Vane:
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By John MacDonald
26th Sep 2014 16:06

Tax evasion

johnjenkins wrote:

Obviously you don't do best for your clients. Having spent 18 years in HMRC  that goes someway to explain your attitude to the self-employed. 23 years in the big 4, well that would explain your attitude towards real Accountants.

Of course you will get a reaction if you slag my profession. Methinks you're a number cruncher, no wonder Mark has come out in your defence.

@Mark. When was the last time you went down the pub and heard people bragging about how they evade tax? Years ago, yes, but not now. You're wrong, Mark. things have changed and not for the better. Why do you think the BOE haven't put interest rates up yet?

Of course there is evasion, but nowhere near the scale bandied about. Perhaps it's these fantasy figure people that are spreading these tales in the pub.

Disclaimer

My post is not meant to be a personal attack against Mark or Vince, merely an odservation based on their posts.

I agree with most of what you say, John, and like you I never make personal attacks on people - I just disagree with them sometimes.

To answer your question about why the BOE haven't put interest rates up yet - it's because the so-called recovery we are supposedly enjoying at the moment is based on a house price bubble, one of the reasons we got into a mess in the first place.

Could I ask you what level you would place evasion at?

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By ShirleyM
25th Sep 2014 21:59

I agree with John

The majority of people want everything to be spot on. That's why they go to an accountant, because they worry about getting it wrong.

There are a few bad apples, but they are usually easy to spot, and a couple of potential clients have openly told me they don't declare all their cash jobs, nudge nudge wink wink. I am not interested in working with tax evaders.

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By Jekyll and Hyde
25th Sep 2014 23:48

of course it's rife, quite obvious.....
... but no more so for small businesses than any other sector of society. Employees evade tax or inflate their net earnings through so called perks! large business evade tax by agreeing amounts with HMRC and the rich evade by trusts and off shore hides (avoidance).

The main issue that need to be addressed is the liberal attitude to policing in this country be it HMRC or other agencies. If HMRC go in hard they are wrong, if the police go in hard they are also wrong. In my opinion the simple issue is that tax evasion is considered a minor breach of the law in the same way as speeding is and there are too many people doing both to have any hope in stopping it.

The tribunals do not help with contradiction of rulings. an example of late filing penalty for non filing of CIS returns is an classic reason why it will continue there is nothing an accountant can do to stop this as it is easily hidden.

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Replying to Syd:
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By John MacDonald
26th Sep 2014 16:14

Tax evasion

Jekyll and Hyde wrote:
... but no more so for small businesses than any other sector of society. Employees evade tax or inflate their net earnings through so called perks! large business evade tax by agreeing amounts with HMRC and the rich evade by trusts and off shore hides (avoidance). The main issue that need to be addressed is the liberal attitude to policing in this country be it HMRC or other agencies. If HMRC go in hard they are wrong, if the police go in hard they are also wrong. In my opinion the simple issue is that tax evasion is considered a minor breach of the law in the same way as speeding is and there are too many people doing both to have any hope in stopping it. The tribunals do not help with contradiction of rulings. an example of late filing penalty for non filing of CIS returns is an classic reason why it will continue there is nothing an accountant can do to stop this as it is easily hidden.
The rot set in when Lester Piggott quite rightly got porridge for not paying a single penny in tax - ever - and was also quite rightly stripped of his knighthood. Patrick Collins of The Mail on Sunday still objects to the final punishment. Consequently, Ken Dodd got off scot free for exactly the same crime - for that is what it is. He was helped by a home town decision - please abolish juries and have Diplock courts as in Northern Ireland, three judges. Some people still want Doddster to be knighted - will the last person to leave this country turn off the lights, if they don't go out should we have a bad winter before they do go out next year.
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By Ken Howard
26th Sep 2014 08:12

HMRC don't really care either

Another point is that even when a suspected tax evader or benefit fraud is reported, far too often, the reports are simply ignored.    What is the point of threatening an accountant with a huge fine and jail if they don't comply with MLR reporting rules and then ignoring the reports once they're made?

In the past, I have made reports, giving chapter and verse as to what type of evasion/fraud has been occurring - effectively offering them the full details on a plate.  What happens?  Nothing!  Nowadays, if I have a report to make, I just give the bare minimum to cover my [***] and stop me from being prosecuted under the MLR regs.  Still nothing happens, but at least I havn't wasted my time and I know I'm not at risk of the knock on the door from the regulators!

The merging of the DSS, NIC, IR and HMCE has been a complete disaster, add tax credits into the mix (another fine mess) thanks to Gordon Brown!  We've had a decade of all tax staff being headless chickens due to constant reorganisation, decent staff made redundant due to office centralisation, poor staff being recruited to call centres instead.  Talk about dumbing down!!!  Add in an overcomplicated and nonsensical tax system and people wonder why the black economy is so big!

Then there's the "image" created by HMRC that "tax doesn't have to be taxing" giving the message that people can file their own tax returns.  So people do!  And guess what?  HMRC don't bother to do any "sanity checks" so drawings get put down as wages, wrong accounting periods are used, private add backs are ignored, 100% capital allowances claimed on normal cars.  I've seen it all - from when people finally decide they need an accountant after doing it themselves for a few years.  One glance is usually all it takes to see glaring errors on prior years tax returns, so why can't HMRC see what I see?  Does anyone even look anymore?

But what do we get from HMRC?  Yes, that's right, they do the simple things like checking that Old Mrs Smith has declared all her interest on all her bank accounts (simple because they can cross check the info from the Halifax against her tax return) - and persecute her because she missed an account, even though it was taxed at source and there is no tax loss effect.  What a waste of resources - common sense would tell them that there was no tax loss even if there was a mistake on the return.  But, of course, it looks good on their tick boxes if they can open and close a tax enquiry quickly doesn't it with the minimum of effort on their part!

The only people to blame for the widespread tax evasion in the black economy is the politicians and HMRC.  You can't blame accountants when so many people do it themselves and don't engage one can you?  You can't blame qualified accountants when so many people are cheapskates and choose the cheapest instead who isn't qualified nor regulated can you? 

 

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Replying to Justin Bryant:
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By John MacDonald
26th Sep 2014 16:25

Tax evasion

Ken Howard wrote:

Another point is that even when a suspected tax evader or benefit fraud is reported, far too often, the reports are simply ignored.    What is the point of threatening an accountant with a huge fine and jail if they don't comply with MLR reporting rules and then ignoring the reports once they're made?

In the past, I have made reports, giving chapter and verse as to what type of evasion/fraud has been occurring - effectively offering them the full details on a plate.  What happens?  Nothing!  Nowadays, if I have a report to make, I just give the bare minimum to cover my [***] and stop me from being prosecuted under the MLR regs.  Still nothing happens, but at least I havn't wasted my time and I know I'm not at risk of the knock on the door from the regulators!

The merging of the DSS, NIC, IR and HMCE has been a complete disaster, add tax credits into the mix (another fine mess) thanks to Gordon Brown!  We've had a decade of all tax staff being headless chickens due to constant reorganisation, decent staff made redundant due to office centralisation, poor staff being recruited to call centres instead.  Talk about dumbing down!!!  Add in an overcomplicated and nonsensical tax system and people wonder why the black economy is so big!

Then there's the "image" created by HMRC that "tax doesn't have to be taxing" giving the message that people can file their own tax returns.  So people do!  And guess what?  HMRC don't bother to do any "sanity checks" so drawings get put down as wages, wrong accounting periods are used, private add backs are ignored, 100% capital allowances claimed on normal cars.  I've seen it all - from when people finally decide they need an accountant after doing it themselves for a few years.  One glance is usually all it takes to see glaring errors on prior years tax returns, so why can't HMRC see what I see?  Does anyone even look anymore?

But what do we get from HMRC?  Yes, that's right, they do the simple things like checking that Old Mrs Smith has declared all her interest on all her bank accounts (simple because they can cross check the info from the Halifax against her tax return) - and persecute her because she missed an account, even though it was taxed at source and there is no tax loss effect.  What a waste of resources - common sense would tell them that there was no tax loss even if there was a mistake on the return.  But, of course, it looks good on their tick boxes if they can open and close a tax enquiry quickly doesn't it with the minimum of effort on their part!

The only people to blame for the widespread tax evasion in the black economy is the politicians and HMRC.  You can't blame accountants when so many people do it themselves and don't engage one can you?  You can't blame qualified accountants when so many people are cheapskates and choose the cheapest instead who isn't qualified nor regulated can you? 

 

Ken, I agree with everything you say. To answer your question, nobody even looks anymore.
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Mark Lee 2017
By Mark Lee
26th Sep 2014 08:16

I agree with Ken - to a degree

I recall being shocked some years back to learn from HMRC stats that only a small % of the self employed use a professionally qualified accountant (or anyone at all) to help them file their tax returns.

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Replying to Yorkshireblue:
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By armstrm
20th Oct 2014 15:56

If this is a problem, than

 

bookmarklee wrote:

I recall being shocked some years back to learn from HMRC stats that only a small % of the self employed use a professionally qualified accountant (or anyone at all) to help them file their tax returns.

If this is a problem, than the system needs simplifying. It should be possible for anyone to be able to deal with simple tax affairs without the help of accountants.

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Replying to dmmarler:
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By qad999
05th Jan 2015 23:18

A relative ?

armstrm wrote:

 

bookmarklee wrote:

I recall being shocked some years back to learn from HMRC stats that only a small % of the self employed use a professionally qualified accountant (or anyone at all) to help them file their tax returns.

If this is a problem, than the system needs simplifying. It should be possible for anyone to be able to deal with simple tax affairs without the help of accountants.

 

Are you related to Bob Harper  ? ..   you  need to wake up ..   we work in the real world .. the complexities of  tax law  will not go away .. so stop smoking the weed

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By Exector
26th Sep 2014 10:17

The elephant in the room

Anyone who is in general practice will know the truth of it, but pace Mark Lee and a few exceptions, the absolute plummet in the numbers of bog- standard HMRC enquiries into small/medium sized individual & corporate clients accounts, both full and particularly aspect, is hardly ever acknowledged as no-one wants to create rods for their own backs or bring an end to what for us is a much more comfortable regime. In this practice, I would guess that over my time here, the average number of HMRC enquiries is less than 20% of what it was even 10 years ago.There is no doubt in my mind that the awareness of the risk of potential enquiry(& detection of course!) is one of the biggest factors reducing evasion, but because deterrence is almost impossible to measure quantitatively, it has fallen out of favour and off the radar with the obsession with figures on actual tax lost recovered that can be boasted about.. I also agree the standard of those few enquires that do get undertaken has fallen substantially, especially on the small company tax side and that is undoubtedly due to the loss of trained specialist CT Inspectors and the substitution of officers who have just had relevant modules stuffed down them. The organisation is now pennywise, pound foolish and run by those who know the cost of everything and the value of nothing.

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By njpandya
26th Sep 2014 11:44

ACES

Article is good; to understand tax evasion and theft one has to understand the process, architecture & mainframe on which the system is running, also they must have enquiring & analytical mind. Which in general I see missing or perhaps miserably absent from HMRC staff & Management in particular.

In UK, there is no strong connection between companies house & HMRC. Income Tax & Sales Tax. A person may well be running a company &  crossed VAT turnover threshold long time ago but guess what, he is still not charging VAT & now planning to change to new company & it's very easy in UK. There is no instrument where HMRC can spot this and question why VAT is not charged.

To set up a company it only takes a day. These self employed PSC's in particular who earns in six figures are particularly skipped else I would say HMRC have no IDEA what's going on. There is no connection between HMRC & UKBA many immigration offenders in UK provide NI numbers but how appalling UKBA have very few cross organisational powers to see how much these people earns and evade tax. This is not a rocket science as HMRC trying to show, the problem is they have a fitted tendency of 9-5 & ridiculous staff attitude & no one cares, they became thick skin.

One of  my friend's friend received a demand from HMRC approx. for £700.00, he was unable to pay all at once. If you have seen assessment letter it say how they can help us. Keep reading how fool HMRC is. He told he would like to set up a direct debit & HMRC asked how much for he said £15.00 each month. But little did HMRC knew this guy is flying next month and won't be back for a long and he suspended all bank accounts which means HMRC lost tax due. This raises many questions do these jokers have any idea what's going on in this country...this is just one example...GOD SAVE THIS COUNTRY... which is not going to happen, because GOD gave brain & if you don't apply it's your fault not GOD's

 

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Replying to dansm:
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By John MacDonald
26th Sep 2014 16:32

Tax evasion

njpandya wrote:

Article is good; to understand tax evasion and theft one has to understand the process, architecture & mainframe on which the system is running, also they must have enquiring & analytical mind. Which in general I see missing or perhaps miserably absent from HMRC staff & Management in particular.

In UK, there is no strong connection between companies house & HMRC. Income Tax & Sales Tax. A person may well be running a company &  crossed VAT turnover threshold long time ago but guess what, he is still not charging VAT & now planning to change to new company & it's very easy in UK. There is no instrument where HMRC can spot this and question why VAT is not charged.

To set up a company it only takes a day. These self employed PSC's in particular who earns in six figures are particularly skipped else I would say HMRC have no IDEA what's going on. There is no connection between HMRC & UKBA many immigration offenders in UK provide NI numbers but how appalling UKBA have very few cross organisational powers to see how much these people earns and evade tax. This is not a rocket science as HMRC trying to show, the problem is they have a fitted tendency of 9-5 & ridiculous staff attitude & no one cares, they became thick skin.

One of  my friend's friend received a demand from HMRC approx. for £700.00, he was unable to pay all at once. If you have seen assessment letter it say how they can help us. Keep reading how fool HMRC is. He told he would like to set up a direct debit & HMRC asked how much for he said £15.00 each month. But little did HMRC knew this guy is flying next month and won't be back for a long and he suspended all bank accounts which means HMRC lost tax due. This raises many questions do these jokers have any idea what's going on in this country...this is just one example...GOD SAVE THIS COUNTRY... which is not going to happen, because GOD gave brain & if you don't apply it's your fault not GOD's

 

I agree with most of what you say, my disagreement will come right at the end.

Your point about HMRC management hits the nail on the head. The present and previous - may she rest in peace - Chief Executives/Permanent Secretaries were, by their own admission, not tax experts.

UKBA used to be part of HMCE in old money and were in HMRC before being spilt off - Chief Executive Lin Homer. I rest my case.

To respectfully disagree with you. Can you prove that God exists, ever did exist or ever will exist?

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By justsotax
26th Sep 2014 12:31

not using a qualified probably

costs the self employed person in the long run....not sure it can be associated with tax evasion when the likelihood is they don't know what they are doing. 

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By dawney
26th Sep 2014 15:02

hmrc have got it all wrong !!

What mixed comments you have all posted..

I am self employed & currently under investigation for 2010.

I am a sole trader & employ 6 part time staff from 16 hours to 30 hours & 1 full timer who is my husband.

I have a very young, rude & unhelpful Tax Man dealing with me, we just keep going round & round in circles. He no longer corresponds directly with me as I sent him a letter asking for an aplolgy for when he laughed down the phone at me about my business, which I have worked my [***] off to keep going through the ressession. (HMRC should be giving me a pat on the back !!)

Last year he said pay £16,000.00 by march to close the investigation !! He just wanted to get rid of me & claim his bonus.. hence being told pay by march !! I am so shocked that he would have got a bonus !! This is had ernt tax payers money being wasted in bonuses !! disgraceful.

I did not owe £16,000.00 & as my business was hit hard with the recession I did not have a spare £16,000.00  

2010 was the hardest year of my life !! I was penny less, I sold anything I could sell from my own personal belongings I even had to sell my dead mother wedding ring ! I had a mortgage holiday as I could not pay it, I cashed in my 2 life endowment policies etc etc,  life was hell, I fed my kids egg & chips day in day out. So forgive me for feeling so hard done by from HMRC !!

So after saying no to £16,000. He then asked for other stuff I can't even remember now but we gave him whatever he asked for.This 2010 investigation  has been going on for nearly 2 years. We just keep going round in circles. He wanted proof of what I lived off, he's had all the papers re mortgage, endowments, working & family tax credits... every penny I had saved went back into the business !!

My accountant is fed up with sending duplicate explanations & papers for the same requests which he then tells the tax man you had all this before !!

Now the latest thing he wants is my husbands bank statements, which my husband refuses as he is only an employee & on principle he refuses. He wants me to sign a for approval of this otherwise he will consider approval of the first tier tribunal. My husband is .. lets go to tribunal & have our day in court to show the tax man how wrong he is. !!

 

So, my Tax Man may be disorganised & may be he's still learning the role but he just keeps digging & digging with me !!

Sorry this so long winded but I want you all to know the above !!

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By johnjenkins
29th Sep 2014 11:48

@John MacDonald

At what level does anyone put evasion. The problem is that avoidance has now been seen by some as evasion so it all gets lumped together.

M&S were taken to a tribunal because they set up their non UK sales in Southern Ireland, taking advantage of lower corp. tax. Ludicrous, of course M&S won. Unfortunately someone decides to say, oh that is aggressive avoidance, HMRC have lost x amount and so it goes on. Of course the bigger figure that gets bandied about the more people think that we are a nation of fiddlers. That simply isn't true. If the black economy was as big as these figures suggest we would be stagnant like countries where the black economy thrives. The tax system is deliberately confusing so that any money that is in the black economy will eventually filter it's way into the real economy. Gordon Brown got greedy and the rest is history.

As investigations go, I have found that PAYE are on the up as opposed to corp tax, especially re-categorising the self-employed (another tax avoidance fallacy that bumps up the figures). VAT is still the same.

So if you call some directors getting away with a bit of entertainment, a few self-employed doing a few privates and Joe Bloggs getting away with a bit of VAT on some building work, evasion (which it is) instead of perks, then you still ain't gonna get anywhere near the £60-£100b reported from very dubious sources.

I would say that REAL evasion by the ordinary business would be no more than £1b (yes of course it's too much). I do not include tax avoidance and the big boys shifting their money around.

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By johnjenkins
20th Oct 2014 18:39

The thinking behind

doing your own tax return is quite simple. If you do it yourself you are less likely to get an investigation. How true that is I do not know.

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By Balancing
11th Apr 2016 12:03

My experience is of an accountant (Partner no less) colluding in/supporting tax evasion and neither his firm or the ICAEW caring.  Instead, they have both dismissed my complaint, seemingly without investigation.  If the regulatory body is paid for by it's members a conflict of interest and prejudice is arising.

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