How HMRC tracks down rogue tax payers

 In HMRC Investigation

So here’s how HMRC catch most people, they look at what you say you earn, and they know this because it’s on your tax return, then they look at your lifestyle, your car(s) your home(s) your partner(s) and they then look to see if the figures stack up.

If they think you are living a highlife on a low income they can simply guesstamate what they think you owe and stick you with a tax bill.

It’s up to you to prove that your income = equals your lifestyle, and if you can’t you have serious problems.

So here’s a real life example of this: I was investigated around five years ago and HMRC saw that on my credit card statements there would often be debits at Gatwick Airport, they began to put together a case built around my jet-set lifestyle. I simply wasn’t earning enough to fly around the world every few weeks.

It’s often very difficult to prove a negative and when push comes to shove it’s your word against theirs – and that’s not good.

The truth was that I went to Gatwick with my children to spot aeroplanes and spend hours and hours going up and down the monorail. While we were at the airport I’d sometimes use the cashpoint or my credit card to pay for food.

When I gave them that information they simply didn’t want to believe me it was only when I said I had a large number of photographs and film of trains landing and my kids on the monorail that they backed off.

There’s a recent article in the New York Times about this practice and how it’s becoming more widespread, see below. It’s really worrying because what HMRC are saying is that you are guilty unless you can prove otherwise, it’s up to you to provide the evidence and that’s not always possible.

Italians Have a New Tool to Unearth Tax CheatsNew York Times

ROME — Despite the government’s best efforts, tax evasion remains something of a pastime in Italy, where, famously, more than a few of the Ferrari-driving set claim impoverishment when it comes to declaring their incomes.

So this month, not without controversy, the National Revenue Agency decided to try a new tack. Rather than attempting to ferret out how much suspected tax cheats earn, the agency began trying to infer it from how much they spend.

The new tool, known as the “redditometro,” or income measurer, aims to minimize the wiggle room for evasion by examining a taxpayer’s expenditures in dozens of categories, like household costs, car ownership, vacations, gym subscriptions, cellphone usage and clothing. If the taxpayer’s spending appears to be more than 20 percent greater than the income he or she has declared, the agency will ask for an explanation.

In a country that is desperate for revenue to straighten out its ailing public finances — and where newspapers routinely publish articles about Lamborghini-loving proletarians — one might expect the redditometro to attract some support, at least among Italians who file truthful tax returns. Yet the redditometro has run into strong opposition, not least from the nation’s suffering retailers, who are worried that it will discourage consumer spending and sink their businesses further. Others have criticized it on civil rights grounds, saying it is overly intrusive.

However it is received, the measure reflects the government’s widening effort to persuade more Italians — some say, to bully them — to comply with the tax code…

For full article click here.

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