HMRC tax evasion and tax debt task force

As HM Revenue & Customs (HMRC) announces that it has launched task forces across the UK to tackle tax evaders, RSM Tenon, (a top 10 UK accounting firm) says this is yet another example in a series of initiatives that HMRC have begun to step up the battle against tax evasion, non compliance and bad debt.

The specialist recovery teams are understood to be tackling high-risk trade sectors across the UK, which began with the plumbing and heating industries and now sees the restaurant trade in its sights.

Traditionally those targeted across the three high profile offending industries see high volumes of cash transactions or business failures where HMRC is the largest creditor and as such it believes that £billions each year are diverted away from the public coffers.

Gary Ashford, Head of Tax Investigations at RSM Tenon, said:

‘We are now starting to see the unveiling of HMRC’s new approach to tackling non compliance. Clearly HMRC are seeing the restaurant trade as a high-risk area, hence sending in this new task force instead of offering some sort of voluntary tax disclosure…”

With HMRC and also local councils, standing firm on debtors and bringing in third party debt collection firms in the wake of the Government Spending Revue under criticism to become more efficient, it is still staggering to learn that 318 local authorities in England, Scotland and Wales engaged third–party debt recovery agencies with a total of 5,939,003 debt recovery cases between 2007-08 and 2009-10 alone and we can expect the figures to rise.

It is clear that HMRC are taking the issue of tax evasion and non compliance very seriously and coming down hard on evaders and they have already made it perfectly clear there will be a five fold increase in criminal prosecutions from 2011.

Basis for Task Force on Restaurant Industry

With recent figures suggesting out of the current level of business administrations, nearly 75% cite HMRC as the largest single creditor at the point a company enters administration. It is therefore no great shock to learn that HMRC is going after those businesses; it feels may offer greater risk. Restaurants have always been portrayed as one of the riskiest forms of business venture in any case, and given the current economic climate one can see how HMRC may focus their attention (fairly or not) on this sector.

Following this news the British Hospitality Association have issued the following statement:

The British hospitality industry is worth £46 billion to the UK economy and the core hospitality economy is estimated to directly contribute £34 billion in tax revenue. Our industry directly contributes 2.44 million jobs making the hospitality sector the fifth largest industry in the UK. Plus a further 1.2 million jobs are indirectly generated by hospitality, accounting for a total of eight per cent of employment in the UK. The vast majority of hospitality businesses are responsible enterprises and comply fully with all legal requirements and guidance as laid down by HMRC.”

Mike Eland, director general for Enforcement and Compliance, said in response:  ‘Only those who choose to break the rules, or deliberately evade the tax they should be paying will be targeted. Honest businesses have absolutely nothing to worry about.’

Given the Government’s record on data accuracy, many will take Mike Eland’s statement with a pinch of salt but playing Devil’s Advocate, if HMRC were a business and not the Taxman, it would not be lambasted for its initiatives as the effect of tax avoiders, evaders, fraudsters and tax debtors does have a serious impact on not just Government but the very public (individual and commercial) that it serves.

Late payment problems in the private sector lead business failures, poor cash flow and it’s inevitable for a late payer to expect debt recovery and debt collection action being taken them so are HMRC perhaps taking a leaf from the private sector and becoming more efficient?

CCDR (Corporate Credit Debt Recovery Ltd) are a professional debt recovery agency and our results speak for themselves. Get in touch for a no obligation discussion on how we can help and be safe in the knowledge that we operate our services on a ‘no collection, no fee basis’

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