{"id":14597,"date":"2012-03-13T17:56:25","date_gmt":"2012-03-13T17:56:25","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=14597"},"modified":"2012-03-13T17:56:25","modified_gmt":"2012-03-13T17:56:25","slug":"700000-missing-corporate-tax-returns","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2012\/03\/13\/700000-missing-corporate-tax-returns\/","title":{"rendered":"700,000 missing corporate tax returns"},"content":{"rendered":"

H M Revenue & Customs will issue 850,000 penalty notices <\/a>for late income tax returns this year. It sounds an astonishing number but actually about 8.8 million tax returns are filed a year (based on data here, page 9<\/a>). That makes the error rate less than 10%, and given that many who receive penalties will never file, somewhat lower still.<\/p>\n

This ratio, however, pales into\u00a0insignificance\u00a0when compared to that for\u00a0corporation\u00a0tax returns. I research this in 2009-10 tax year. The sources of all my data can be found here, all coming from official statistics, Companies House and\u00a0parliamentary\u00a0answers. What I prepared was the\u00a0following\u00a0table:<\/p>\n

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What I showed was that, near enough, there were likely to be 2.1 million\u00a0companies (at a minimum)\u00a0from whom it may have been reasonable to\u00a0request\u00a0corporation\u00a0tax returns in that year and that since (again, I think generously) maybe 50% of all new companies will never trade and so will never have a tax bill that can in turn be\u00a0downgraded\u00a0to 1.9 million companies that could be liable to submit a return. The estimate turned out to be fair: based on data on page 48 of my report it's clear HMRC asked for returns from about 1,884,000\u00a0companies\u00a0that year. Alternative data on page 46 suggest the figure may have been lower at 1,796,000.<\/p>\n

What\u00a0officially\u00a0supplied data then confirmed was that just 1,183,000 tax returns were actually submitted.<\/p>\n

However looked at that the inevitable conclusion was that some 600,000 returns were\u00a0definitely\u00a0not submitted. Compared to the estimates noted the number of reasonably expected returns not submitted exceeded 700,000.<\/p>\n

What became clear was that although only 500,000 or so\u00a0companies\u00a0certified as dormant HMRC did not ask for tax returns form about 30% of all companies. And of those that were asked to submit returns only 66%, or thereabouts, did, at best. Overall, well\u00a0under\u00a0half of all companies in existence in the\u00a0year\u00a0submitted returns, an astonishing\u00a0statistic.<\/p>\n

Of those that filed tax returns the Revenue reports that about 915,000 paid tax . This is a ratio of about 73% paying tax. I used this ratio to suggest that of\u00a0those\u00a0not filing that\u00a0ratio\u00a0would owe tax. The government has quite extraordinarily claimed not filing a\u00a0return\u00a0means no tax was owed. I think that an absurd, and reckless, assumption, but that makes it\u00a0consistent\u00a0with so many they make when it comes to tax evasion. I estimated as a result that some \u00a316 billion of tax may be lost as a result.<\/p>\n

Now I stress, that's an\u00a0extrapolation\u00a0and an\u00a0estimate: such figures\u00a0can't be right but let's put the number in context.\u00a0It cost just \u00a366 million[i]<\/a> to run Companies House in 2009-10 and about \u00a34.4 billion to run H M Revenue & Customs in the same year[ii]<\/a>. The losses in tax arising from failing to regulate companies might as a result exceed by a ratio of three to one, or more, the entire cost of running the departments meant to regulate their activities.<\/p>\n

The consequences of regulatory failure for the UK economy are enormous, and one that the ordinary people of the UK are now bearing as a result of tax increases and service cuts when there should instead be many thousands of people employed by the government to crack down on\u00a0 abuse in the form of tax evasion through limited companies that the current \u2018blind-eye\u2019 approach of both H M Revenue & Customs and the Department for Business, Innovation and Skills permits.<\/p>\n

In the name of \u2018cutting the burdens on business\u2019 successive governments have allowed an environment to develop in which fraud and criminality can thrive. It is time that an end was put to this abuse, in the interest of honest business and ordinary people.<\/p>\n

And let's remember - when we consider the use of\u00a0limited\u00a0companies is\u00a0intermediaries\u00a0in what should be employment relationships, many of such companies will be amongst those not filing their accounts and tax returns. And that's another very good reason for concern.<\/p>\n

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[i]<\/a> http:\/\/www.companieshouse.gov.uk\/about\/pdf\/annrep2009_10.pdf<\/a><\/p>\n<\/div>\n

[ii]<\/a> http:\/\/www.hmrc.gov.uk\/about\/hmrc-accs-0910.pdf<\/a><\/p>\n<\/div>\n

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H M Revenue & Customs will issue 850,000 penalty notices for late income tax returns this year. It sounds an astonishing number but actually about
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