CCH have issued a press release, which seems to have been posted in full on AccountingWEB, saying (in part):
HMRC has raised £415.3 million through investigations into business self-assessment forms over the past year, a 35% increase on last year when it netted £308 million in additional tax, interest and penalties, according to calculations made by leading tax and accounting information group CCH.
According to CCH the overall amount of additional tax raised by HMRC in the last year from all personal and business tax enquiries has risen dramatically by 62% from £5.657billion to £9.167billion.
Neil Tipping, Senior Consultant, CCH said:
What these figures show is a sharp increase in the amount of money HMRC is raising through its investigation work into self-assessment forms. And, whilst it may seem alarming to businesses who are about to submit their returns at the end of this month, the extra figures are in fact as a result of better targeting by the Revenue.
In the past HMRC have been known to take a general broad brush approach to investigations, but over the past 12 months improvements to their risk profiling system has enabled them to target tax avoidance and evasion more effectively. This is great news for all those innocent businesses and general taxpayers who may, in the past have been the focus of HMRC.
Four things:
1) This is good news for innocent taxpayers;
2) This may be alarming for those submitting their tax returns - but only if the taxpayer knows they have submitted a false return (and a great many do both submit false returns and know they have, despite the persistent denials of the accounting profession);
3) The tax recovered is as yet but the tip of the iceberg.
4) The fact that the tax recovered from small business is such a small part of total recoveries is also worrying. The employed are likely to be well over 90% tax compliant in their returns. The self employed have a much lower compliance rate. The failure to increase recovery from the small business sector as much as is happening in general is of concern in itself.
I will publish more on this over the next month or two.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Or is it quite simply that the smaller business sector is in fact more compliant than the Revenue, and others, (mis)lead people into thinking?
I would imagine that it is not so much that the smaller business is not compliant, because I don’t think that is the case.
What I imagine is more the case, it is those who operate on the ‘black market economy’ without ever registering with the Revenue who are responsible for any tax gap and not those who register!
Jason
I am afraid none of the evidence supports your opinion. Sorry. The fact is the self employed systematically underdecalre their income.
Richard
When the merger of IR and HMC&E was announced I was privileged to attend a meeting (as a rep of ICAEW) at 11 Downing Street when Gus O’Donnell tried to justify the staff cuts that had also just been announced.
I recall saying to him (and still believe) that the tax take would go up if there were more people telling their mates about how they’d been caught out by the Revenue. That would require more investigations (risk based and random) so as to catch out more people who have tried it on. I’m afraid that human nature being what it is there are probably plenty of people sailing close to the wind and also a goodly number who consciously underdeclare their self employed income.
In the first year of, what was then, the new Self Assessment system 10 years ago the Revenue seemed to be adopt a generous and laid back approach. There were far fewer enquiries even in the final month of the first enquiry wiindow. So us professionals advised our clients to expect more enquiries the following year. But it didn’t happen then either. In fact it never happened. Over the last ten years there has been a systemic failure by the Revenue to ensure that cheating tax payers are discouraged and honest taxpayers encouraged to fully declare their income.
The Government’s targets place all of the emphasis on the aggregate level of tax, interest and penalties collected through their investigations. I think there should more emphasis on the number of enquiries and investigations. As things stand I’d bet more people ‘down the pub’, at the golf club and elsewhere swap stories about what they’ve ‘got away with’ than about how they’ve been caught out.
Until and unless that situation changes the headline figures of tax collected through investigations will have no impact on the chancers who do not pay the ‘right’ amount of tax. None of their mates have been caught so those big numbers must relate to the big boys. After all, the Revenue are no longer interested in ‘small fry’. At least that’s my view of the general perception.
[…] an aside, I was surprised with Richard Murphy’s assertion that: The fact that the tax recovered from small business is such a small part of total […]
Mark
Agreed – here should more emphasis on the number of enquiries and investigations
Richard