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Government Spending Review – HMRC to Get Tough on Tax Avoidance and Evasion

The Government Spending Review has resulted in HMRC being told to step up its efforts to tackle tax evasion and avoidance. See how this might affect you, and Mazars’ view of this new development.

One government department that’s having its budget cut is HMRC. Overall they are being expected to shave 15% off their overall costs, but they’ll have to reduce current costs by a quarter so they can pay for upgrades to computer systems.

But at the same time as reducing the funding of HMRC, the government have pencilled in a huge increase of £7 billion in the amount of additional tax they expect HMRC to produce from investigation work. HMRC have been told by the government to “transform” their work against tax avoidance, evasion and criminal attacks against the tax system.

It’s difficult for most taxpayers to be sure they follow every detail of the complex UK tax system. With HMRC being asked to collect more tax with a reduced budget HMRC will be much less likely to show mercy to those who have not paid the full amount of tax that HMRC think is due, and there is the danger that HMRC will be less likely to accept that those who are found to have not told HMRC about their full income did so unintentionally.

Indications are that HMRC will be making tax investigations even more painful.

What can you do so you’re not contributing towards HMRC’s £7 billion target?

The best way is to pay the right amount of tax – taking the benefit of all tax reliefs and allowances – with the advice and assistance of a tax advisor.

If HMRC decide to investigate your affairs, the negotiation with HMRC is usually the most important factor in determining the size of any settlement with HMRC. Mazars frequently find that HMRC have based estimates of unpaid tax on incomplete information or a misunderstanding of our client’s affairs. Mazars tax investigations specialists have considerable experience of HMRC’s approach and use this to assist in ensuring clients do not overpay.

It was also announced that more tax evaders – those who hide income or gains from HMRC – will be criminally prosecuted. The government want a five fold increase in prosecutions. This is a significant increase, and if you are one of the people who receive a letter from HMRC’s Criminal Investigations department it is vital to seek properly qualified professional help.

Jon Claypole of Mazars summed up the impact on HMRC saying: “Mazars do not condone any attempts to evade or illegally avoid tax. However it is very easy to make mistakes. When HMRC think they have found an underpayment of tax they’ll probably look to maximise the payment. Good advice in tax compliance and in connection with investigations will pay dividends in reducing tax bills.”

For more information, or if you require assistance with a particular tax investigation issue, Jon Claypole (Partner) can be contacted on 07799 033089 or jon.claypole@mazars.co.uk and Stephen Outhwaite (Senior Manager) can be contacted on 07794 031401 or stephen.outhwaite@mazars.co.uk.

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