Actual cash collected through HMRC investigations hits £13bn – up 27% in a year

Publications that covered this story include: Economia and Bloomberg Tax on 19 August 2019 and The i and The Daily Telegraph on 20 August 2019.
  • Cash collected through the Loan Charge driving trend
  • However, most of HMRC’s yield from investigations is hypothetical

HMRC saw its actual cash collected from tax investigations hit £13bn in 2018/19, up 27% from £10.3bn in 2017/18, our research shows.

The jump in cash collected has been partly driven by payments HMRC has received ahead of the Loan Charge being introduced in April 2019. Any individual who had used avoidance schemes to reduce their income tax bills had to pay any tax owed to HMRC an April deadline or face extra charges.

It is estimated that 50,000 people who used these loan-based avoidance schemes had to pay back tax on up to 20 years of income in a single financial year. Some individuals were faced with tax bills stretching into hundreds of thousands of pounds.

Clive Gawthorpe, Tax partner at our Manchester office, says: “HMRC has managed to collect a bumper yield from investigations into individuals but it comes at a cost”

“HMRC’s approach to the loan charge was heavily criticised for being draconian but it pushed on with its schedule regardless. A bigger cash hoard was the net result.”

Our research shows the high level of cash collected could also reflect the results of HMRC’s offshore tax campaign last year. This required individuals to declare any overseas income or gains by September 2018, and pay any liabilities owed, or face penalties of up to 200% of the amount owed.

The HMRC has also become more successful at identifying cases for investigation that are likely to result in large amounts of extra tax being collected. HMRC now has vast amounts of data at its disposal as well as increasingly advanced computer systems which has made building evidence for investigations easier.

Despite the increase in cash collected last year, actual cash only makes up 38.5% of the £34bn HMRC claims to have collected from investigations. The rest is made up of hypothetical estimates, such as ‘revenue losses prevented’ and ‘future revenue benefit’.

These measures represent theoretical ‘income’ made by discouraging taxpayers from attempting to avoid or evade taxes, either this year or in the future, rather than real money collected.

Actual cash collected through HMRC investigations hits £13bn – up 27% in a year. Breakdown of HMRC compliance yield for 2018/19