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New HMRC ‘ruthlessness’ piles pressure on tax evaders to disclose

Alvarez & Marsal Taxand’s Andrew Watt says tax evaders are facing an increasingly ‘ruthless’ HMRC

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However, some industry experts believe the real figure could be significantly higher.

Despite the huge proposed cuts in other areas, the Government has announced that it will give HM Revenue & Customs (HMRC) an extra £900m over the next four years to step up the attack on tax evasion and avoidance.

HMRC will use this funding to:

  • increase the number of criminal prosecutions fivefold,
  • create a dedicated team of investigators to find people who hide money offshore,  and
  • deploy more tax experts to target tax avoidance in large businesses

This renewed concentration of resources reinforces HMRC’s declared aim to “come down hard on those who seek an unfair advantage through failing to calculate, return or pay the right amount of tax.”

Combined with other recent changes such as the imposition of more stringent penalties where undisclosed funds are held in jurisdictions which do not exchange information with the UK, the power to publically name and shame defaulters, and increased inspection powers, HMRC has embarked on a new era of ruthlessness which it is hoped will bring in around an extra £7 billion per annum by 2014-15.

‘Vast’ database on evaders

The new unit, which will target tax fraud perpetrated by using offshore structures, will be able to utilise a vast database of information built up by HMRC over a number of years.

The Offshore Disclosure Facility in 2007 targeted the customers of main High Street retail banks.

Then, in 2009, the New Disclosure Opportunity led to HMRC serving information notices on the 300 plus banks in the UK which have an offshore presence.

Fiscal authorities around the world, including many in so-called tax havens, are now cooperating closely with one another to share information through Tax Information Exchange and Double Tax Agreements.

As if that weren’t enough, HMRC has also obtained bank account information from Switzerland and Liechtenstein that had been stolen by rogue employees.

If a taxpayer has an undisclosed account in Liechtenstein, or elsewhere offshore that was not opened via a branch or agency, and has not yet received an enquiry notice, then they may be able to take advantage of the Liechtenstein Disclosure Facility (LDF) –  a genuine amnesty which runs until 31 March 2015.

Under the LDF, tax evaders will pay unpaid tax due from 6 April 1999 only, a fixed penalty of usually 10%, and will normally be granted immunity from criminal prosecution. 

But it is crucial to note that anyone contemplating coming forward under the LDF must do so before HMRC targets them for a serious fraud investigation under Code of Practice 9 which will eliminate the LDF option.

As the Government’s efforts to replenish the Treasury coffers continue, taxpayers can expect HMRC to continue to step its efforts.  

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