HM Revenue & Customs (HMRC) has been hit by the outbreak of the coronavirus pandemic and subsequent lockdown just like everybody else.
According to investment platform AJ Bell, HMRC received 42% less in tax payments in April 2020 than it did in the same period last year.
The areas that have seen the biggest fall are insurance premium tax (22%), income tax (21%), and national insurance contributions (18%), which can be attributed to the number of people who have either been furloughed or lost their jobs as a result of lockdown.
But the taxman did report a 51% increase in capital gains tax compared with April 2019.
Laura Suter, personal finance analyst at AJ Bell, said: “The first sign of the lockdown crunch on the government’s tax take can be seen in its release of how much tax the nation paid in April – which has fallen off a cliff compared to last year.
“The total tax receipts taken by the government in April dropped 42%, as people lost their jobs, staff were furloughed, and businesses used government coronavirus schemes to defer tax.
“The government faces a huge challenge ahead to deal with these falling tax receipts while also having to pay for its numerous support schemes during the current crisis.
“So far around £5.2bn ($6.3bn, €5.8bn) has been spent on the coronavirus job retention scheme, and it’s inevitable the public will see tax rises to help meet the shortfall,” she added.
Vital investigative teams
But not all was lost.
Analysis by law firm Pinsent Masons shows that as many as 209 of the taxman’s specialist task forces have been actively investigating taxpayers who avoided paying tax over the last year.
The teams tend to tackle professions and industries where tax evasion and avoidance seem to be more widespread, even among the most peculiar ones, the law firm explained.
Some of the sectors the task forces have been targeting are:
- The adult entertainment industry;
- Dog breeders;
- The haulage sector; and,
- Market stall traders among many others.
HMRC managed to collect an extra £540m from these industries and professionals who were due unpaid tax.
The revenue that task forces managed to raise has been steadily increasing since 2014, Pinsent Masons said:
- £138m in 2014/15;
- £248m in 2015/16;
- £388m in 2016/17;
- £464m in 2017/18;
- £540m for 2018/19.
‘Tax evasion remains a priority’
The law firm explained that task forces team up with investigators from the Fraud Investigation Service (FIS) if the behaviours in question are believed to be serious enough to deserve criminal sanctions.
The FIS adds an extra layer to the investigation process; as it has a full range of police powers, including the ability to carry out dawn raids, interview people under caution and make arrests.
For now, the taxman has suspended the overt activity of its task forces to regroup its workforce towards the handling of the covid-19 pandemic.
But this doesn’t mean investigations will not resume once the pandemic is under control.
Andrew Sackey, partner at Pinsent Masons, said: “HMRC sees task forces as a key part of its ‘promote, prevent, respond’ strategy for boosting tax revenues and changing taxpayer behaviour – they continue to prove to be very effective.
“Task forces are so effective because they are intelligence driven and narrow in focus. They bring together experienced civil and criminal investigators to deliver publicly visible interventions in a specific taxpayer segment where issues are believed to exist.
“This enables them to deliver a far greater hit rate than many of the broader investigatory undertakings.
“The additional funding pledged to HMRC’s compliance work in the March 2020 budget shows how cracking down on tax evasion remains a priority for the government.
“The Treasury forecasts HMRC will collect an additional £4bn in extra tax over the next five years, and the use of task forces will play a visible role in achieving this,” he added.
