Tax investigations

HMRC’s total yield from investigations into tax avoidance and evasion leaped by a third to £21bn in 2011-12 (year end March 31), says accountants UHY Hacker Young.

Yet HMRC compliance investigations in 2010-11 brought in just £16bn, while in 2004-5, the first tax year handled by the post-merger HMRC, the figure was a mere £6.9bn.

UHY Hacker Young says the big jump in compliance yield is a sign of HMRC’s increasingly aggressive approach to tax investigations, aimed at increasing tax revenues from every possible source.

The firm says it expects the taxman to further ratchet up its tax investigations over the next year.

Roy Maugham, tax partner at UHY Hacker Young, said:

‘HMRC’s approach to compliance is becoming more hard-line with each passing year, and that is reflected in these figures. This is the approach HMRC must take if it is to meet the very ambitious compliance yield targets set by the Chancellor.’

‘The Government has put HMRC under pressure to deliver, and they in turn have put businesses and individuals under pressure.’

HMRC has used numerous task forces to tackle tax avoidance among more than 30 groups, including London lawyers, fast food restaurants, online traders and the construction industry. It aims to rake in an additional £150m through such activity.

Despite the success of HMRC’s approach, UHY Hacker Young warns that the high profile nature of these stings may result in negative repercussions for businesses, as investigators are put under pressure to bring in increased revenues.

Maugham said:

‘There is a real danger that these tax inspectors, who swamp a sector, will be forced to keep digging until they find something – anything – to justify the noise HMRC has made about its task forces.’

‘It used to be that compliant businesses had nothing to worry about, but this is changing as inspectors come under huge pressure to increase yields.’