The Guardian ran an excellent article yesterday on the likely tax abuse inherent in the outsourced Covid track and trace contracts. As they recounted:
Many workers employed across the £37bn NHS test-and-trace service are being paid through networks of opaque small companies that experts fear could be defrauding the Treasury via a notorious tax scheme.
They added:
Tax experts and unions fear weak controls by outsourcers and government agencies, and a complex chain of companies supplying labour for the service, which was created from scratch a year ago, have raised questions over the transparency of the system and left it wide open to abuse.
The scheme — which involves what are known as mini umbrella companies (MUC), often fronted by directors in the Philippines — allows employers to dodge their national insurance contributions, and is estimated to cost the taxpayer hundreds of millions a year.
Creating such systems of abuse is probably easier in the UK than it is anywhere else in the world because in this country companies can be bought for less than £20 with no proof of identity required; there is no effective monitoring of shadow directors, and HMRC are exceptionally lax when it comes to regulating new companies. A company has to only declare that it has never traded and the chance that HMRC will ever investigate that claim is near enough zero. The claim is simply accepted at face value.
I have, of course, been pointing this out for more than a decade now, and literally nothing has been done to address the issue. Companies House remains as useless as it has ever been, and as Prem Sikka pointed out in the article, there is no effective company regulation in the UK at all.
So, we will lose hundreds of millions if not billions and yet claim there is no resource to create effective company monitoring. It's almost as if the government wanted to permit tax abuse and to allow its own revenue to be undermined. Who would have imagined it?
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Meanwhile HMRC will fine people who are trying to put their affairs in order – just recently we heard of a case as follows.
Elderly widow, lost husband a few years back and he did the self assessments for them both. Widow sells a rental property in late 2020, solicitors say nothing (very rare for them to mention it to sellers), the lady knows she will have to get it sorted on her self assessment tax return, oblivious of the need to report to HMRC within 30 days of sale (as well as reporting it again on her self assessment).
Will now face penalties, that she will pay unless HMRC can be persuaded otherwise.
Contrast with HMRC and Companies House consistently failing to get into the stuff you refer to above.
I do wonder what a functioning state looks like.
I find many penalties like this deeply offensive when they are imposed on innocent error
I also find solicitors who say nothing ‘because we don’t advise on tax’ profoundly offensive
agreed – penalties are completely unfair and counter productive in encouraging compliance.
Also, the CGT reporting for residential property disposals only needs to be done for anything that isn’t main residence. That is total nonsense – if HMRC wanted to properly collect the tax due, it would require all sellers of residential property to make a declaration – that would focus the attention of sellers who conveniently forget that some tax might be due. It would also have assisted the widow in knowing she had to do something.
Classic HMRC own goal.
Agreed
“I do wonder what a functioning state looks like.”
Nothing like Britain. The Conservatives are in the process of creating what I would term a ‘hologram state’; the first virtual polity that does not actually exist.
‘Hologram State’.
I like it – very apt.
I hope the Scots will demand more than this if they get independence.
‘Hologram State’.
You can see it but you can’t touch it.
Yep – that’s right – unassailable power and corruption.
But after 2008, what option was there for Neo-liberal Thatcherism when the chickens came home to roost?? I see this as the last ditch defence of our Establishment. There’s something desperate about it – they’re going big no doubt about it before the country sees sense. Maybe this is their last hurrah?
And the Tories are good at managing one thing – scraping as much out of this for themselves and their constituency (the Rich) as possible.
What has the Labour leadership been saying about this? Nothing.
I cling to the hope that the UK has its own Trumpian dénouement and that the opposition and its supporters wake up.
I hope what follows is not too tangential – but it starts to answer the question posed at the end ……about encouraging abuse of all sorts & with the withdrawal of state functions, which in turn, turns UK citizens (oh sorry – subjects/serfs) into prey be it for the tax collectors or the crooks identified in Monbiot’s piece.
https://www.theguardian.com/commentisfree/2021/may/12/laws-protect-scams-enforcement-gutted
I suppose the motto of the crooks mentioned is “Let us prey”. That of Liebour is: look in the other direction & pretend it is not happening.
I was about to mention the same thing.
The criminal courts are in or at least approaching a state of collapse, and there is next to no enforcement of consumer laws or planning rules or environmental laws, or a host of other regulations. The Grenfell Tower fire was created in large part by this sort of regulatory failing: the building regulations in themselves are OK, but if they are not followed and enforced then they become meaningless hot air. Laws are not magic words that enforce themselves.
Hollowing out the public sector in the blind pursuit of cost reductions creates a failed state.
Web are becoming a failed state, Scotland Wales & Northern Ireland will go their own ways not over any great matter of principal but because they have to.
Not to mention the time waste by our very own Public Services who for one reason or another (usually non compliance with legal requirements e.g. housing law, food and food standards law) spend endless amounts of time trying to track down the real individuals who thrive on the anonymity Companies House provides. Why are Government’s so blind to this? Public sector personnel are obstructed in their statutory duty to protect the public by the Government itself.
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]