22 November 2010
- 10 times more interventions this year
- Tax per intervention drops from £2,057 to £444
UHY Hacker Young's research has shown that the amount of tax collected per tax compliance intervention has plummeted 78% over the past year. [1] Tax compliance interventions involve HM Revenue & Customs (HMRC) informally contacting over a million taxpayers querying their tax returns.
According to our figures, HMRC collected £444 in additional tax per intervention (2009/10) compared to £2,057 per intervention the previous year (2008/09).
The number of interventions increased more than tenfold over the past year, from 123,000 in 2008/09 to 1,281,000 in 2009/10. However, the amount of additional tax collected has only doubled, from £253 million to £569 million.
The new ‘interventions’ involve HMRC contacting taxpayers by telephone, letter or in person to discuss aspects of their tax affairs identified as being at high risk of error. The interventions allow HMRC to avoid having to open a formal tax enquiry, which can be far more restrictive in terms of the areas it can probe and guidelines it must follow.
These figures prove that interventions are an increasingly unproductive method of improving compliance and are becoming more difficult to justify both in terms of the burden placed on taxpayers and the costs to HMRC.
Some commentators have criticised the use of interventions as intrusive and often alarming to the taxpayer.
Roy Maugham, tax partner in our London office, comments: “HMRC is increasingly adopting a blunderbuss approach to interventions. For all its much-vaunted new risk profiling, its hit rate has deteriorated dramatically.”
“The inconvenience for taxpayers caught up in these interventions can be considerable, yet HMRC seems to be blazing away indiscriminately. These interventions impose significant costs on taxpayers.”
“Nine out of 10 taxpayers contacted by HMRC as part of an intervention have absolutely no extra tax to pay. This compares with around half of formal enquiries which result in some form of tax adjustment, so you have to question how useful they are compared to formal enquiries.”
He adds: “Everyone accepts that HMRC has a right to target tax evaders, but the nature of these interventions seems anything but targeted. HMRC claims that these interventions are aimed at areas where the risk of non-compliance is high, but the results suggest they are little better than old fashioned fishing expeditions.”
HM Revenue & Customs interventions 2009/10
| 2009/10 | 2008/09 | |||
|---|---|---|---|---|
| Interventions | Number (thousands) | Impact | Number (thousands) | Impact |
| (£ million) | (£ million) | |||
| Better support to claimants | 524 | 40 | 38 | 5 |
| Preventing Error and Fraud | 104 | 173 | 57 | 96 |
| Tackling Non-Compliance | 653 | 356 | 28 | 152 |
| Total | 1,281 | 569 | 123 | 253 |
[1] http://www.hmrc.gov.uk/about/hmrc-accs-0910.pdf
We produce a range of informative publications focusing on the latest accounting issues. Click to add yourself to our mailing list.
Up to £15 million will be clawed back from academy schools before the end of the current academic year due to government budgeting errors, according to our data.
A quarter of all taxpayers may be paying the wrong amount of tax due to incorrect PAYE codes according to our analysis.
The cost of listing on AIM has risen at its fastest rate in more than five years according to our findings.
A sudden surge in M&A activity on AIM is being driven by private equity backed deals to take companies private, our research reveals.
From 6 April 2012 HMRC will be able to ask employers to pay a financial security where it thinks there is serious risk that the business won’t pay over their PAYE tax deductions or National Insurance contributions (NICs) on time.
The value of loans to businesses in the UK has slumped by 13% since the collapse of Lehman Brothers, the second fastest fall among the G8, according to our findings.
Our international network, UHY, welcomes new member firm in Tunisia, CNBA.
Hot on the heels of an announcement from HMRC that the closure date for the Liechtenstein Disclosure Facility (LDF) has been extended to 5 April 2016 has come speculation that the local banks are pushing for much higher transfers of funds into Liechtenstein and a minimum period for which any account must be kept open.
Almost two thirds (65%) of all penalties and decisions issued by HM Revenue & Customs (HMRC) to taxpayers in relation to VAT matters are subsequently found to be incorrect and are overturned on internal review.
Andrew Andronikou and Peter Kubik were appointed as Joint Administrators to Convers Sport Initiative plc (CSI).
