28 November 2011
- Extra tax from VAT interventions increases by 92%
The amount of extra tax gained through HMRC’s investigations into tax avoidance and evasion has hit a record £16.5 billion, says our findings.
The amount collected through tax enquiries and other compliance work was up a dramatic 37% in just 12 months (to March 31 2010 - latest data available) compared to £12 billion in the previous year.
This has been achieved through a more aggressive approach adopted by HMRC towards clamping down on tax avoidance as reducing the budget deficit remains a top priority for the Government.
Revenue from HMRC’s compliance investigations
Roy Maugham, Tax Partner at our London office says: “This is the biggest annual increase in the amount of money taken through compliance work since HMRC was established five years ago.”
“Although this money helps to fill the hole in the Government’s deficit, there is a big downside.”
“The extra investigations, the more aggressive stance HMRC takes, the changes in law needed to give HMRC new powers – everything needed to collect this extra money – all risks making the UK a less attractive jurisdiction for businesses.”
“Many UK companies have moved their domicile overseas to Ireland, Switzerland and Malta not just because of the UK’s high business taxes but also because of the increasingly aggressive attitude of HMRC to tax collection. There is a downside to their tough approach.”
Roy says that loss in tax revenues from businesses that decided not to locate their headquarters in the UK could be far more costly to HM Treasury than the short term boost from the increased compliance take.
Roy adds: “The Government and HMRC now seem to believe that they found the secret of alchemy. All they need to do is invest more money in tax investigations and compliance work and the extra tax income will keep flooding in.”
“The reality is that much of the money that HMRC collects from compliance work is from businesses that feel intimidated into settling with HMRC or it is from litigation where HMRC is able to outspend a less well-resourced small or medium sized company.”
Our research found that the largest contributor to total collected from compliance work in the last year was corporation tax enquiries which made up £4.6 billion or 23% of the total compliance income collected by HMRC.
Extra tax from VAT interventions increases by 92%
Extra tax brought in through VAT interventions has soared to £6.2 billion in the last year, up 92% from £3.2 billion the year before.
VAT interventions carried out on large businesses in particular brought in £2.4 billion in the last year, a substantial increase from £837 million the year before.
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