SMEs to get a HMRC kicking

 In HMRC Investigation

In an article in Taxation this week CHRIS CHADBURN says the writing is on the wall for SMEs (small and medium enterprises). HMRC are about to give them a real kicking.

Posted: 12 January 2011
Issue: Vol 167, Issue 4287
Categories: Analysis, Features
Keywords: NAO, National Audit Office, Liechtenstein disclosure facility, LDF

Related articles:
Civil investigations see 49% boost in yield
LDF ‘will raise only half its target yield’
Taxman failing to handle phone calls: NAO

CHRIS CHADBURN reviews the National Audit Office report on HMRC’s management of civil tax investigations

  • Targeted checks on small and medium-sized enterprises.
  • Local Compliance yield increased in 2009/10.
  • Effectiveness of referring cases to a central HMRC unit.
  • Learning from the Liechtenstein disclosure facility.
  • Average penalty paid is 21% of the tax due.

In 2009/10, HMRC collected £435 billion in tax, according to the National Audit Office’s report HMRC: Managing civil tax investigations. In the previous year, the tax gap was estimated to be £42 billion.

The department believes £15 billion of this emanated from fraud, evasion and criminal attack deriving from the non‑compliance of approximately 5% of individuals and 7% of businesses, the equivalent of around 1.5 million individuals and 300,000 businesses.

The report examines ‘whether the department is managing its civil investigations efficiently and effectively by making best use of resources to maximise levels of compliance and tax revenue’.

It received little coverage in the national press; publication on Friday 17 December could have been significant, as could the fact that, in many ways, the message was very positive from HMRC’s perspective, with large increases in yields achieved during difficult times.

The Guardian was one paper that did highlight the report. Its news item had the headline Tax cheats avoiding fines when caught and included the comment that ‘critics say the deals mean there is little deterrent for tax cheats who will have nothing to lose other than the tax they should have paid’.

The NAO report has no criticism of the long-standing fundamental idea that…

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