HMRC action against tax avoiders deemed “unacceptably slow” by Public Accounts Committee.
As the chair of the Public Accounts Committees, Margaret Hodge, succinctly summarises, “HMRC must do more, faster.” HMRC simply aren’t collecting in enough taxes! Worryingly, there are examples of individuals, specifically designed schemes and companies avoiding UK tax and not receiving swift justice.
Individual tax avoidance
The Public Accounts Committee brought up the 3,600 British people who comprise the so-called Falciani List. These individuals are suspected of avoiding UK tax by the rather clichéd route of using a Swiss bank account. The Committee have tasked the Tax Office to implement quicker progress in this case using the new weapons it has been able to wield since July this year.
Tax Avoidance Schemes
There are certain schemes that are set up with the sole purpose of allowing their investors to avoid paying tax. The Committee referenced one called Liberty that gained a lot of press attention because of high profile investors like Gary Barlow, Katie Melua and George Michael. But they were only 3 of the 2000 members of the scheme who collectively got away with as much as £10 million in unpaid taxes. Unfortunately the slow pace of HMRC’s investigations means that 30 people may get away without paying it back at all! They have a window of 12 months to start looking at an individual’s tax affairs, which they failed to do in 30 cases connected to the Liberty scheme.
One scheme that is finally at the tribunal stage this year was actually closed in 2009!
Margaret Hodge commented that HMRC “was unable to tell us how much delays had cost across the different tax avoidance schemes”. It is reported that, over time, the Liberty scheme alone has kept £1.2 billion out of the public pocket. No wonder Mrs Hodge is worried that “This may be just the tip of the iceberg”.
HMRC and Companies
HMRC was described as “losing its nerve” when tackling multinationals’ tax avoidance by MPs back in December 2013. This recent report does not see any improvement.
There was their error made when establishing a starting point for compliance work that was not noticed for 3 years and cost £1.9 billion.
The MPs involved in the committee also point out that HMRC are allowing the UK to be taken advantage of by multinational companies by not clamping down on their abuse of international tax regulations. Basically, it is perceived that it is easier for companies to achieve ‘tax residency’ status in the UK than it is in other EU countries.
For example Mrs Hodge said, “Research into 7 companies who have recently relocated to the UK for tax purposes showed very little inward investment was generated or jobs created in the UK in return for the tax benefits the companies receive.”
HMRC now face the challenge of rectifying this imbalance to minimise any future tax losses. Along with the Treasury, they are now obliged to report on how the international tax laws are being manipulated and chart precise financial positive and negatives as they affect the UK’s tax stream.
HMRC’s response
The HMRC spokesman put up a straightforward defence to the Committee’s report. He said that “we exceeded our targets for tackling tax dodgers and criminal gangs every year since 2010” and that they had recouped £31 billion from investigations into multinationals since 2010.
He acknowledged their costly mistake saying, “We will work closely with the National Audit Office to ensure there is no repeat of the baseline error for which we apologise to the committee”.
He also said that taxpayers believe that “we will robustly tackle tax avoidance whenever it happens” and gives his evidence for this as “taxpayers are contacting us for help to disentangle them from schemes that simply do not work.”
We wish them luck in their implementation of a just tax system where everybody really does pay their fair share. Maybe the government needs to invest more in this pursuit?
