HMRC is boosting its revenue by targeting smaller amounts on peoples’ personal tax returns as well as using informers in what some see as a shadowy practice.
The amount HMRC recovers from investigations into personal tax returns has been climbing steadily over the years and in the year 2011/2012 amounted to Â£440.6 million.
HMRC are working towards retrieving an extra Â£7 billion a year by 2015/2015 in the drive to reduce the government’s deficit.
The taxman now has specialist task forces concentrating on certain professions such as doctors and plumbers, says UHY Hacker Young. Capital Gains Tax also appears to be a lucrative area of investigation for HMRC as is looking at the tax benefits of such things as company cars.
Roy Maugham, Tax Partner at UHY Hacker Young said: “HMRC is trying to raise revenue across the board by undertaking increasingly painstaking investigations. They are now pursuing smaller infractions.”
“Previously, HMRC resources and manpower were only really used to chase larger amounts of money, but now a forensic approach is being used even for when it is just a modest amount of tax that is missing.”
“HMRC is putting a lot of effort into double checking the amount of capital gains tax that business owners should pay on selling their businesses, as they know it is an area where they can pick up big slugs of extra money.”
“Calculating capital gains tax can be confusing, and people often make mistakes when they file their returns. Because the lump sums involved are higher than for many other forms of taxations, HMRC can ratchet up its returns quickly if it uncovers a mistake.”
“As it stands, HMRC isn’t missing any tricks when it comes to collecting this extra revenue. The targets it has been set are extremely high, and HMRC is really focusing all its energy into ensuring it meets them.”
The City law firm Reynolds Porter Chamberlain LLP (RPC) says that, according to information from an FOI request it made, HMRC paid informers Â£373,780 for the year to 5th April 2012, which is an increase of 21% over last year’s Â£309,620.
Tax Partner at RPC, Adam Craggs commented: “HMRC are under intense pressure from the Treasury to increase the tax yield for the Exchequer and they are increasingly resorting to unorthodox methods to get the job done, such as paying informers for tips that may lead to the opening of enquiries into the tax affairs of the individuals concerned.”
RPC says that HMRC’s High Net Worth unit, which targets individuals with wealth exceeding Â£20 million, and its Affluence unit, which targets individuals with a net worth of at least Â£1m, may pay informers for information on those individuals who they suspect of having not complied fully with their tax obligations.
Adam Craggs continues: “HMRC’s focus on high net worth and wealthy individuals means that they are turning to paid informants for evidence of undeclared income.”
“Typically, an HMRC informant will be an angry spouse during divorce proceedings. For the spouse, threatening to supply information to HMRC provides them with some leverage during divorce settlement negotiations. If the divorce is particularly acrimonious, it is not uncommon for a spouse to turn HMRC informant.”
“The sums of money HMRC are paying to informants may not be huge but the payments are increasing and the whole process is shrouded in mystery. HMRC doesn’t make it clear why it might make a payment, when it might make a payment, or to whom it might make a payment.”
“This lack of transparency is very worrying. Are uniform criteria being applied consistently when HMRC make these payments to informers? It’s impossible to tell at the moment. If HMRC are going to make payments to informants there needs to be a robust system in place with appropriate checks and balances. HMRC should be properly accountable when using taxpayers’ money for payments of this nature.”
At the same time the Prime Minister, David Cameron is warning multinational firms that they could face tax investigations. But Nigel Green, the chief executive of the deVere Group says that the PM is just playing the ‘tax blame game’.
“Mr Cameron is slamming companies who take legal measures to minimise their tax liabilities.” Said Mr Green “Of course businesses try and mitigate their taxation as they have a responsibility to their shareholders to turn as large a profit as possible, which is both honourable and economically responsible as profit creates jobs and wealth.
“He is demonising corporations for paying what he perceives as too little tax, and using incendiary language which could incite protest groups to employ ‘direct action’ tactics against major brands, when it is the government who is responsible for the legislation governing corporation tax.
“For the Prime Minister to knock private firms, which are the lifeblood of the economy, for playing by the government’s rules smacks of hypocrisy.
“Politicians should stop playing the tax blame game and focus their energies on simplifying the complex tax rules as the current system, clearly, does not work worldwide.”
Earlier this month, the Public Accounts Committee claimed that Apple, Google, Facebook, eBay and Starbucks, had collectively “avoided nearly Â£900 million of tax".