The last five years has seen the number of tax investigations undertaken by HMRC increase steeply. The Revenue broadened its narrow focus on High Net Worths and began clamping down on taxpayers from all walks of life – including many moderately successful professionals and entrepreneurs.
The Conservative Party 2015 Manifesto contained a pledge to collect an extra £5 billion per year via a crackdown on underpaid tax. That means that an even wider range of taxpayers are likely to face increased scrutiny as officials strive to meet the target.
HMRC has carried out a number of targeted job sector campaigns. Those involved included traditional cash-in-hand businesses, such as taxi drivers, private tutors and plumbers. A number of white collar professions, including solicitors and dentists, have also found themselves the focus of HMRC campaigns.
The Government also oversaw a major investment in technology by HMRC, to help it identify further targets for investigation. Its £45 million database system, ‘Connect’, was first launched in 2010, and gathers real time data from multiple public and private sources to help the Revenue identify where tax avoidance may be an issue. Information is drawn from banks, local councils, legal aid data and even social media.
One further major development is the Government’s signing of an automatic information exchange agreement co-ordinated by the OECD. This will allow HMRC access to an unprecedented level of detail on individuals’ overseas savings and investments from 2017. More than 50 countries have signed up to the information sharing agreement, including Switzerland, Jersey and the Cayman Islands. The Revenue will be able to compare the data it receives from abroad with its own records to identify discrepancies or reason for suspicion.
The increased risk these developments pose for ordinary taxpayers means that many are opting to protect themselves against the costs that may be incurred in a tax investigation. You can protect yourself against the cost of most tax investigations by subscribing to our Tax Investigation service.
