Tax investigations

The taxman has collected 64% more in revenue from self assessment returns in 2011/2012 than in the previous year.

Figures from accountants UHY Hacker Young show that HMRC received £440.6m in the 2011/2012 tax year, compared with £269.8m in the previous year.

The spike in revenue from self assessments follow HMRC’s announcement in 2010 that it would be working towards a target of obtaining £7bn in additional revenue a year by 2014-2015, as part of efforts to reduce the government’s budget deficit.

UHY Hacker Young says that the pressure to meet this target is behind HMRC’s more detailed scrutiny of self-assessment returns.

In addition, HMRC has been particularly focused on increasing revenues from Capital Gains Tax on the sale of buy-to-let property and on the sale of stakes in businesses, the firm says, adding that HMRC is paying to more attention paid to the possible under-reporting of income from rental property and bank accounts.

HMRC has also increased revenues thanks to its new specialist HMRC taskforces which focus on particular types of tax evasion or particular trades and professions.

Roy Maugham, tax Partner at UHY Hacker Young says that HMRC is trying to raise revenue across the board by undertaking increasingly painstaking investigations and pursuing smaller infractions.

‘Previously, HMRC resources and manpower were only really used to chase larger amounts of money, but now a forensic approach is being used even for when it is just a modest amount of tax that is missing.

‘HMRC is putting a lot of effort into double checking the amount of capital gains tax that business owners should pay on selling their businesses, as they know it is an area where they can pick up big slugs of extra money.

‘Calculating capital gains tax can be confusing, and people often make mistakes when they file their returns. Because the lump sums involved are higher than for many other forms of taxations, HMRC can ratchet up its returns quickly if it uncovers a mistake,’ warns Maugham.

The taxman is also becoming more aggressive in the treatment of employee benefits such as company cars, the firm said.

‘As it stands, HMRC isn’t missing any tricks when it comes to collecting this extra revenue. The targets it has been set are extremely high, and HMRC is really focusing all its energy into ensuring it meets them,’ said Maugham.

UHY Hacker Young says HMRC’s yield may also have been boosted in this area by adding in revenue that they have protected by rejecting invalid claims for tax reliefs.