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HMRC increases number of 'detentions' handed out to tax defaulters

Tax expert predicts even more people will be referred to special monitoring programme in this financial year

20 May 2015

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A Freedom of Information request made to HMRC has revealed the taxman is getting tough on those who deliberately seek to default on their tax liabilities.

Accountancy firm Baker Tilly made the request which revealed more than 6,000 tax defaulters, consisting of individuals and businesses, were referred to a special HMRC monitoring unit in tax year 2014/15, up 30 per cent on the year before.

Under the programme, HMRC closely monitors taxpayers to make sure they file all their returns and make all their payments on time. The department can also make announced or unannounced inspection visits to business premises to check business records or assets and carry out rigorous compliance checks into all or part of a defaulter's tax affairs.

These powers also extend to individual partners, directors or officers of a company, or any business that a known defaulter is involved with.

There is no right of appeal against inclusion in the programme and HMRC can continue to monitor defaulters until it is satisfied they are meeting all tax obligations and have changed their previous non-compliant behaviour. The accountancy firm estimates this can last for between two to five years. Serious defaulters include those who have been charged a penalty for deliberately under-declaring income in their tax returns.

Recently released data, also obtained by Baker Tilly, shows that the number of individual penalties imposed for such deliberate behaviour almost trebled last year, rising from 5,162 in 2012/13 to 14,401 in 2013/14.

Mike Down, head of tax investigations at the accountants, said the increase in the numbers of people referred to the programme signals that HMRC is getting much tougher on those who actively seek to sidestep their tax responsibilities.

'The MSD programme is equivalent to a school detention where an errant taxpayer's behaviour will be under close scrutiny by the taxman,' he said.

'HMRC has significant monitoring powers, and those individuals and businesses referred into the programme can find the experience extremely uncomfortable and onerous.'

He continued: 'As we enter a new parliament, there will be immense pressure on HMRC to clamp down on defaulters in attempt to reduce the tax gap, so it's likely that we'll see more people referred into the MSD programme in this financial year.'

This article first appeared on PCA's sister publication, Solicitors Journal

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Tax & Wealth structuring