Cracks starting to show at HMRC as they fail to bring in the cash they projected

 In HMRC Investigation, Margaret Hodge

We’ve had a full 12 months of HMRC saying that they are going to generate more money with less staff, that they are going to stamp on previously approved ‘umbrella schemes’. Yes they talked the talk, but they haven’t walked the walk. The financial projections (dressed up as fact) are not yielding fruit while the ‘umbrella schemes’ are being staunchly defended by Middle England.

Now Margaret Hodge, who chairs the public accounts committee, has accused HMRC of being “unacceptably slow putting tax revenues at risk.”

The FT has reported that Margaret Hodge also attacked the HMRC over its handling of an avoidance scheme called Liberty that began in 2005. A potential loss of up to £10m, caused by a delay in starting inquiries into 30 taxpayers’ use of the scheme might be “just the tip of the iceberg”, she said.

The MPs on the public accounts committee also attacked an “amazing” £1.9bn error in a performance measure, which inadvertently resulted in HMRC presenting misleading information to parliament about gains it had made.

“Astonishingly, this significant error . . . went undetected by HMRC’s own system of governance and internal audit for three years,” the committee said.

The Revenue said that even after taking its mistake into account, “we exceeded our targets for tackling tax dodgers and criminal gangs every year since 2010”.

The MPs said they welcomed action that HMRC had taken to address some of their concerns about tax avoidance, such as the “accelerated payments” scheme requiring those in marketed avoidance schemes to pay their tax bill up front. But they added: “Slow progress in other areas has put tax revenues at risk at a time when pressures on the public finances are acute.”

The Revenue said: “We have accelerated collection of tax from avoiders enormously: since the government introduced accelerated payments, avoiders have already agreed to pay well over £25m.

“The way we now work makes it clear to promoters and users of schemes that we will robustly tackle tax avoidance wherever it happens – so increasingly taxpayers are contacting us to help disentangle them from schemes that simply don’t work.”

The MPs urged the Treasury and Revenue to provide information on tax structures and the costs and benefits of recent changes. They reported that alterations to the tax regime had been challenged by international bodies as constituting “harmful tax practices”.

They also reported criticisms that the UK’s tests for corporate residency were less rigorous than other EU countries and the economic benefits of corporate relocations to the UK were minimal.


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