Business News
HMRC enquiries and tribunals – what to do now?
As well as outlining the departments plans and aims for the year ahead, the newly released HMRC Business Plan 2010-11 also includes a few points that everyone should take heed of:
• Ensure those seeking to evade tax are subject to robust and effective civil and criminal action
• Tackle avoidance risks through policy and legislative design, designing opportunities for avoidance and continuing to develop principles-based legislation which strengthens defences against innovative avoidance schemes. Where avoidance does occur, we (HMRC) will detect it early and tackle it through effective legislative change and/or well-targeted challenge, litigating where necessary.
It’s no surprise that tackling non-compliance and battling tax evasion has long been a full time objective for the HMRC.
Their last performance report from December 2009 shows that the tax revenue from self assessment business and enquiries was well over half a billion pounds and by no means a negligible figure. As such, eradicating tax evasion is set to remain a priority as the new government looks for ways to maximise to tax income in a difficult economic climate.
From tax evasion to avoidance: a shift in focus
There have been some notable shifts in HMRC policy regarding tax in this year’s Business Plan. The first is well illustrated by their new departmental goals, with the HMRC now taking big steps to crack down on tax avoidance which has been confirmed within the law as illegal on several occasions.
Cracking down on tax avoidance will now be a priority for HMRC after being highlighted in the new government’s election manifesto, leading us to the key question – given that tax payers are permitted to structure their affairs so as to minimise tax avoidance, when could financial or taxation advice be seen as a case of tax avoidance that must be disclosed to HMRC?
Tax evasion has recently been addressed through a number of methods, most famously by ‘tax amnesties’ whereby tax evaders could come forward and declare unreported income in exchange for lower penalties.
All those with undeclared funds who choose not to take part in the amnesties have been threatened with investigation by the HMRC as they gain access to more and more data under the tax information exchange agreements signed off by different countries around the world.
What is in question however is how the HMRC will cope with these investigations? The department is currently under-resourced and over-stretched; a situation that looks set to continue with the new government’s emphasis on public spending cuts, and has in the past been reluctant to initiate criminal prosecutions given that the process can be both time consuming and costly.
Therefore, it is expected that taxpayers who come forward and declare irregularities could expect more lenient treatment and avoid prosecution or costly penalties.
When will this happen?
We should expect to see a slew of investigations launched over the next few weeks and months as the HMRC steps up its effort to eradicate tax avoidance and pays increasingly close attention to financial data overseas.
So what should you do when faced with a letter from HMRC announcing an enquiry?
Firstly, the response to the letter is crucial. It will have to very carefully considered and as comprehensive as possible.
This first response will determine whether the enquiry is pursued by HMRC; if it does blossom into a fully fledged investigation, the key thing to remember is that honesty is always the best policy.
Where HMRC uncover evidence of wilful evasion, i.e. where an individual has purposefully tried to avoid paying tax, the penalties can now be as high as 200% of the value of the unpaid tax.
Therefore anyone who may have any unpaid tax would be well advised to make a full and prompt disclosure. NOW!
If you or your business may be subject to any of the issues outlined above, contact Suretax Accounting today for expert advice on a range of finance and taxation issues.
