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HMRC plans could lead to innocent people being prosecuted

HMRC plans could lead to innocent people being prosecuted

Accountants for contractors may want to warn their clients that HMRC plans to increase prosecutions against people who avoid paying their fair share of taxes fivefold.

Currently, the Revenue investigates around 200 cases per year but this is about to rise to 1,000, according to a new report entitled HM Revenue & Customs: Managing civil tax investigations, published last week.

Every month the Revenue’s dedicated investigation teams receive almost 400 referred cases, but only 20% actually get investigated.

As from the beginning of the new tax year on April 6th, offshore tax evaders will face new penalties. In some instances, offenders could be fined up to 200% of their outstanding tax liability.

However, the Revenue has been warned that it is notoriously difficult to establish tax evasion and some innocent people could face criminal prosecution in order for the department to reach its target.

HMRC has also come under criticism for its plan for large-scale checks of business records. The CIoT says the proposal is misguided and needs to return to the drawing board.

Under the current proposals, HMRC intends to check up to 50,000 cases of suspected poor record keeping each year and impose fines on businesses whose bookkeeping is not up to scratch.

The deputy president of the CIoT, Anthony Thomas, says that whilst the Institute welcomes attempts to improve bookkeeping standards, the Revenue’s approach will not work. It seems to be more aimed at raising money through fines than helping companies improve their systems. Instead it should focus on providing support, guidance and education.

The CIoT is questioning the legality of imposing penalties before a tax return is submitted, unless there is proof that the company concerned has failed to maintain any records. It suggests that the Revenue should run more structured workshops, aimed at tax agents, prior to the commencement of business record checks. Furthermore, agents should receive advance notice informing then when an inspector is going to visit and taxpayers without representation should be provided with guidance on the powers and rights of HMRC.

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Image: My Three Angels by DownTown Pictures

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