Is HMRC doing enough to tackle tax fraud?

19 April 2016

Mike Down

Last week the Public Accounts Committee (PAC) concluded that HMRC’s progress in reducing losses due to tax fraud is limited, with ‘too confusing’ reporting by the department of its own performance. With almost half of the £34bn tax gap being attributable to tax fraud, the PAC criticised HMRC for failing to set out a clear strategy for dealing with tax evasion, calling on them to address the perception that not enough is being done to tackle tax fraud by the richest in society.

The PAC stated it is vital for HMRC to focus on tax fraud and carry out more investigations so that honest taxpayers can more readily see that the UK operates a tax system which is fair to all and doesn’t undermine public confidence.

However, with an ever-reducing people resource at HMRC, is the PAC’s criticism justified? As well as collecting significant additional amounts of tax, a series of initiatives and disclosure opportunities have undoubtedly sought to raise public awareness of the need for all taxpayers to fully and accurately declare all sources of income and capital gains.

Furthermore, backed up by (a) much improved sources of international intelligence and methods of risk analysis, (b) the threat of harsher financial penalties and (c) a new strict liability criminal offence for offshore issues, HMRC hopes and expects that the imminent introduction of a new ‘last chance’ tougher offshore disclosure facility will encourage those with tax irregularities to come forward and settle up. Key for HMRC will be to ensure the vast amount of information being gathered from sources around the globe is quickly and cost-effectively processed so that tax evaders are identified and challenged. Arguably HMRC needs to enhance public awareness of its work to identify and tackle tax fraud and it will be extremely important to improve on how it communicates its successes.

In recent weeks the press and media have taken great interest in how the government conveys messages to the public. Those involved in financial services will shortly be compelled by HMRC to contact all clients to ensure they understand the need to properly address all offshore tax issues. Might it be better for HMRC to consider spending money on a leaflet campaign to each and every UK household explaining everyone’s duty to pay the right amount of tax - not just tax relating to offshore matters - but to UK-based income and gains as well?

For more information please get in touch with Mike Down or your usual RSM contact.