People who pay their taxes promptly and in full will be dismayed to discover that the enormous level of tax avoidance taking place is overwhelming HMRC’s efforts to combat it. The scale of the problem is staggering. There are tens of thousands of users of mass-marketed avoidance schemes in the UK. HMRC estimates that over £10 billion of tax is at risk owing to individuals and small businesses avoiding paying money that is due.
Between 2004 and 2011, around 2,300 avoidance schemes were disclosed to HMRC, with over 100 new schemes emerging in the past four years. Until tested in court, I am dismayed that these schemes will continue to reap rewards for individual users at the cost of the public purse. This is particularly galling at a time of pinched resources affecting essential services.
HMRC is struggling to understand what impact its anti-avoidance activities are having. It is overcome by an eye-watering 41,000 open cases of which over 5,000 have sat unresolved for between five and ten years. My concern is that without a credible plan to resolve these cases and to stamp out future avoidance, the public will lose confidence in the tax system’s ability to collect even-handedly what is due from all individuals and companies.
HMRC must step up its enforcement activity to clamp down on promoters of schemes who fail to disclose properly. The DOTAS reporting regime is quickening HMRC’s action against avoidance schemes. But HMRC is constantly playing catch-up as new schemes open up. Fines are being applied in far too few cases to serve as a meaningful deterrent. HMRC needs a robust plan to tackle its mountain of open cases. It needs to start collecting the right information to demonstrate to the public that its anti-avoidance approach works as well as is possible. HMRC should also use this information to press the case for how future tax yields can be improved with appropriate levels of trained staff.
- Inland revenue ‘losing war’ on tax-dodging rich (morningstaronline.co.uk)
- The NAO verdict is that HMRC is in denial about tax avoidance (taxresearch.org.uk)
- If we’re to beat the tax avoidance crisis the National Audit Office identify then we must have a General Anti-Tax Avoidance Bill (taxresearch.org.uk)