I watched a Channel 4 documentary on Monday (14 August) to see what areas it would cover with HMRC’s work into catching ‘tax dodgers’.
The case that I looked at with most interest was a ‘PR Guru’ who instructed his accountant not to submit a VAT Return, for which HMRC successfully prosecuted him.
This is the type of scenario we, as accountants and tax advisers, are more commonly likely to encounter, rather than a £45m foreign wine duty issue.
The case resonated with me as I have seen similar cases with HMRC whereby, what used to be considered a relatively minor offence of not being compliant with your tax obligations, would now result in a Criminal Investigation being launched.
I am currently presiding over two CI cases involving non-submission of VAT and PAYE returns. In each case, neither of the amounts due are particularly high for those of us who deal with tax enquiries on a regular basis; however, HMRC’s stance is to make a statement to demonstrate that perceived tax evasion will not be tolerated. This is in addition to several others that I have had contact with who were being investigated for VAT offences, mainly a failure to register because HMRC suspect they have breached the turnover threshold.
A meeting I had with the lead officer on one of these cases confirmed that HMRC are taking a tougher stance on such offences in order to ‘shock’ local business communities to bring any outstanding issues up to date, or realise that HMRC will deal with them far harsher than in the past.
A lot of cases will centre around VAT, due to the way the VAT legislation differs from direct tax legislation, any non-compliance is potentially a criminal offence which gives HMRC far more scope to obtain a successful prosecution. It is therefore expected that we see a rise in the number of these cases as HMRC pour more resources into an area that they find easy to make cases of.
So, what does it mean for the adviser? In the case of the PR Guru, the adviser did the correct thing in submitting a money laundering report – although I was surprised that this was mentioned as my belief was these would be anonymous and a client would be unaware that a report had been filed against them. I will be checking this again with our own ML officer. I have seen a case whereby HMRC quizzed the adviser into his role in a potential CI case, trying to establish whether the accountant had knowledge of his clients non-compliance, presumably seeking to establish whether the accountant had followed the correct ML procedures had he been aware of the issue.
In December 2016 an adviser was reprimanded for not submitting an ML report despite having reasonable grounds to believe an offence had been committed – the case being an over claim of mileage expenses.
This now puts pressure on the adviser to consider submitting an ML report for any suspected case of non-compliance, no matter how minor it is considered to be.
As far as the individual with the offshore tax issue, in which HMRC took a hard line with him in not offering the benefits of the LDF to him for being late with his submission, again shows HMRS to be taking a hard line against those who have not used the appropriate disclosures facilities in a timely basis. With the upcoming requirement to correct legislation coming into force September 2018, there is greater emphasis for taxpayers to use the Worldwide Disclosure Facility to bring any matters up to date.
Overall, I was pleasantly surprised that the programme gave a fairly accurate portrayal of where HMRC are currently going with their investigations, though it was clearly set out to be a warning to individuals and businesses to get their acts together, resulting in some good PR for HMRC.
If you have any concerns about an on going tax investigation or a client who needs to make a disclosure because of overseas income or previous non-compliance in the UK, then please message me on LinkedIn, call me on 01803 320100 or email me at firstname.lastname@example.org.