As the House of Commons Public Accounts Committee has reported:
HM Revenue & Customs (HMRC) estimates that tax evasion cost the UK £5.5 billion in 2022–23. This is increasing among small businesses, with an estimated 81% of tax lost due to evasion in 2022–23 arising from small businesses, up from 66% in 2019–20. Despite these losses, HMRC does not have a specific strategy to tackle tax evasion. Although it is now HMRC's objective to reduce the overall tax gap, it does not have a specific objective to reduce the tax lost due to evasion.
Unsurprisingly, I agree with the Committee. The Taxing Wealth Report makes clear what could be done. Some of its themes on tax abuse are, usefully, mirrored in this cross-party parliamentary report.
For example, they note how likely it is that HMRC has seriously under-estimated tax evasion, saying:
In January 2021 government introduced legislation making online marketplaces liable for VAT from overseas sellers, resulting in £1.5 billion of additional tax a year. However, this is five times greater than HMRC estimated at the time, meaning HMRC is likely to have underestimated the scale of evasion.
Tellingly, they add this:
We are concerned that HMRC is not sufficiently curious about this difference, and therefore what it might learn and apply elsewhere.
I entirely agree: the impression that HMRC does not care is always apparent in its work on this issue.
The MPs also identify, as I have long done, the problems that the weakness in UK company registration admin creates for tax collection, saying:
Furthermore, significant gaps remain in controls designed to prevent evasion, most notably overseas traders can still falsely register as UK established sellers and companies due to lax checks in HMRC and Companies House registration processes. This means bad actors beyond the reach of UK authorities can too easily evade paying the VAT they owe and gain an unfair advantage over genuine traders.
The Economic Crime and Corporate Transparency Act 2023 introduced new powers for Companies House to check the legitimacy of UK companies, but key changes, such as identity verification for company directors, will not be fully rolled out until the end of 2026. Companies House still does not have powers or plans to check company addresses, despite recognising that this would help to reduce evasion.
Their claims are wholly justified, as is their concern about the lack of action to address this issue:
We are concerned that the UK has too little deterrent, with far fewer prosecutions for tax evasion compared to pre–pandemic levels and limited use of HMRC powers to tackle widely used forms of evasion such as electronic sales suppression. The Insolvency Service disqualifies too few directors given the scale of corporate abuse. Contrived insolvencies cost the exchequer at least £500 million in 2022–23 but the Insolvency Service has disqualified just seven directors for this reason since 2018–19.
Compare that with draconian action on benefits.
HMRC, Companies House and the Insolvency Service acknowledge that there is a significant prize to be had from closer working, but there has been painfully little until now. We look to all three organisations to urgently accelerate this process, starting with a more ambitious vision and a shared plan.
I am afraid that right now, pigs might fly. This will, of course, be labelled 'anti-growth'. As a result, nothing will happen, even if the growth in question is in the abuse of society, the tax system, the government, honest traders and defrauded consumers.
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On my Twitter feed there is a lot about Traffic Police stopping and seizing ‘Light Commercial Vehicles’ which makes me wonder how much information gets passed to HMRC
Clearly if they were advised that someone had been stopped driving an unroadworthy pick up loaded with Scaffolding who hasnt declared any income that might be an additional deterrent
Agreed
I view the lax attitude concerning tax evasion to be simply a meeting of common self interest between anti-statists and criminals. Nothing more than that.
My opinion, pretty much, too.
The “hard” and “difficult” decisions are to remove my WFA and soon my PIP.
Agreed
Good luck
Someone I know had early onset dementia so had to leave work well before retirement age.
She made the very best of things, retained the ability to communicate, and was fairly active. But in no way capable of working.
She literally dreaded the PIP assessments for weeks and needed at least one of her daughters with her as an advocate.
Much like the situation I am referring to
I hope you have appealed, the success rates on appeal are very high
It is suggested by Tribunal Judges that you ask for a hearing and bring someone with you, it doesnt have to be Rumpole of the Bailey but someone who knows you will do just as well to increase the chance of success.
I know someone who just won a PIP appeal – getting the maximum award. Their daughter went with them. The interview lasted hours but it was worth it.
Thank you. I have been through at least 7 PIP assessments. All bar one were humiliating, aggressive, punitive and traumatising. Every time, I have had to re-prove that PTSD from military service, bipolar disorder and severe osteoarthritis have not “got better” and that the latter two are only likely to worsen.
It is the Government’s attacks on and threats against people like me which I fear. Less for myself, actually; more for those who cannot defend themselves and will get no help to do so. Dealing with the DWP is, frankly, terrifying.
You have my very real sympathy.
No government should create this hostile environment.
Dusting off my PhD in the Bleeding Obvious what about handing Companies House over to HMRC and possibly Trading Standards and making it a much more ‘enforcement focused’ organisation?
I see no problem with a merger.
The aim has to be compliance though
One question is the cost of enforcement and returns. Some small companies may struggle, register insolvency, phoenix, and legally restart while abandoning tax debts, so not all of the amounts underpaid are recoverable. Meanwhile, the loopholes used to shift income to tax havens and otherwise artificially reduce the tax burden of companies (particularly multinationals) may realise more?
The scale is so important to hammer home. By Rachel Reeves’ preferred measure that discounts infrastructure spending, it’s more than large enough to clear the deficit. The rest could be used to support small businesses to create growth, to improve services like the NHS, and to invest more in measures like domestic insulation and solar which would reduce the cost of living for many. It would be anti-austerity, pro-growth, and beneficial to >95% of the population.
This one is easy.
In the case of phoenixing limited liability protection for directors has to be removed. It was meant to protect creditors, not facilitate their abuse.
It was meant to protect jobs more than creditors – the creditors generally lose most or all of what’s due. For the government as a creditor it’s slightly more nuanced as they avoid having to effectively underwrite redundancy payments if the company was allowed to fail.
However, the times I’ve seen a phoenix arrangement, there have sometimes been a group of employees who would have been perfectly capable of running the company who didn’t already have a track record of non-payment of debts and milking a company dry, so I would suggest that if protecting jobs is the priority then there could be a mandate for insolvency proceeding to investigate an employee buy-out specifically in preference to handing the operations straight back to the directors who failed the first time around.
The key challenge for such an employee buy-out is that those employees may not have been paid so may be in a poor position for financing immediate activities, but you might argue in favour of a government investment fund that provides grant or equity arrangements to support such take-overs. That would be a fairer outcome than letting those who failed already jettison their debt and still keep all of the future rewards having done so.
Sorry – but I have read extensively on this issue and employees never featured in the consideration or creation of limited liability.
I think you are going in a red-herring of little consequence here, as in some other posts. I have no idea who you are, but some of your claims are not substantiated and are giving me a lot of time in moderation because they are not entirely justified.
Please reference your claims in that case, because I am concerned about their credibility.
I received a letter from HMRC last week telling me that I owe them £1,255.77 for overpayment of Tax Credits in the tax year ending April 2005. I was working at the time and claiming Tax Credits for my youngest daughter who was then in her final school year. I’m now living on my State Pension and a minuscule work pension, and she’s now 38. Apparently they are tying up all loose ends before Tax Credits finish for good in April.
Of course, I’ve kept no paperwork relating to payments I received 20 years ago, and can’t say for sure whether or not I was overpaid through some error, mine or theirs. I do resent though that they pursue piddling little amounts from easy targets like me, while the real criminals who syphon off millions are allowed to get away with it.
2005?
They can’t go back more than six years in most cases – unless there was fraud. Have they said there was? If they have not challenge them on the basis that they are out of time.
It is also possible to claim that is just and equitable that a liability be waived – which would clearly be true in this case.
Those are suggestions of where to start. This is not advice.
I’ve been told by a friend, who is a statistician with HMRC, that the 6-year rule doesn’t apply to Tax Credits which have never been treated as a ‘benefit’. I am appealing against the decision.
I was not aware of that….
If anyone raises any benefits issues I am happy for Richard to give them my email
#NB my expertise is in Housing & Council Tax benefits
Parliamentary research also notes saving jobs as a key benefit of pre-packs in section 3 of this research https://researchbriefings.files.parliament.uk/documents/SN05035/SN05035.pdf
See also https://www.wilsonfield.co.uk/closing-limited-company/creditors-voluntary-liquidation-cvl/pre-pack-liquidation/phoenix-company/ and https://www.kangssolicitors.co.uk/uncategorized/pre-pack-administrations-phoenix-company-fraud/
Note I’m not at all suggesting pre-packs as they stand are generally good – on the contrary I’m suggesting there may be more effective alternatives to consider.
I too have had issues with DWP. Some years ago when transferring from DLA to PIP I had an assessment. The assessor actually lied about what I said and twisted what I told her. I complained, and also got my MP involved. No luck. So I had to go to tribunal. Meanwhile I lost my Motability car for the two years that it took me to get to tribunal. Fortunately my husband had enough to afford a suitable car for him to drive me around in (I gave up driving over 10 years ago as I felt my ME/CFS was affecting my cognition and reaction time too much for me to feel I was safe to continue driving). The tribunal were very kind, though very thorough. In the end they gave me back PIP for 10 years. I still live in fear that DWP will make some excuse to haul me in again for another assessment even though there’s still a few of those 10 years to go. Maybe I’ll be dead before time’s up! Can’t say that would surprise me.
Good luck, Maggie. Go well.