IN RECENT MONTHS, the tax-man has been doing its level best to be seen to be tackling those dodging their tax share.
Part of HMRC’s myriad tools to achieve that has been its taskforces, which it says operate in “short, sharp bursts of activity” in targeted areas of the country and perceived high-risk industries.
Since they were introduced in May, the taskforces have investigated stall-holders in London, taxi operators in Yorkshire and the east Midlands, restaurants across the Midlands and property rental businesses in East Anglia, the north east, Yorkshire and London, among others.
The aim is to induce traders in the target industries and areas to voluntarily come forward and settle any outstanding tax liabilities they might have by generating publicity in the local area. Compliance checks are carried out, as well as announced and unannounced visits.
There is an element of carrot and stick involved, too; generally, if someone comes forward, fully discloses and pays up, the matter is closed, whereas -invasive investigations and potential criminal proceedings await those who continue to dodge their bills.
Measure of success
At the time of writing, £50m is the target figure for the taskforces to bring in, with HMRC so far satisfied with the progress the initiative has made. Indeed, £20m is expected from the property sector alone.
The Revenue says it will measure success through cash collected and “the number of sanctions imposed, from penalties and fines through to the number of prosecutions brought”. It is also hoped that the taskforces will be able to “change the behaviour of individual evaders who will in the future voluntarily meet their tax obligations as a result … and change the behaviour of people who might consider evading tax”.
The budget for the taskforces is part of £900m the Treasury set aside for the taxman to tackle avoidance and evasion. How much of that went towards the taskforces, however, is not public knowledge.
“It’s the sixty-four thousand dollar question for me and for ARC”, says Gareth Hills, president of the Association of Revenue & Customs (ARC), which represents professionals and senior management at HMRC.
“We’ve never been able to tie down where that money’s gone in terms of where it’s been invested in the department.”
Local knowledge
With that money earmarked specifically to tackle evasion and avoidance, the Revenue has been keen to yield results against a background of cuts and criticism from the Public Accounts Committee after the National Audit Office found it wrote off £5.2bn in taxes last year.
There were some 100,000 HMRC employees in 2004, deployed across the country. Today, the number is closer to 60,000 with another 15% of cuts – based mainly in London – to come in the next four years. And they now work according to sector instead of region.
The move to sector-based specialisation is perfectly understandable, provided it is combined with local knowledge.
“When investigators were investigating local businesses, they would have local knowledge,” says Phil Berwick, director at Pinsent Masons. “If you are looking at take-aways, for example, showing a different spread of results, then you might know there is one next to a cinema with more passing trade than one further down the high street. There are dangers [in a sector-based] approach if it’s not combined with local knowledge.”
Gareth Hills does not recognise that problem, however, and is keen to stress the Revenue still has a “has a network of local offices across the UK”.
“People shouldn’t think that because they do not fall within the businesses or locations targeted by the task forces that they will not be selected for enquiry. That’s not the case,” he says. “The taskforces target specific traders and businesses in specific areas where there’s an identified high risk of tax leakage. The nature of the traders and businesses subject to this approach are based on local knowledge in those locations to determine the riskiest areas.”
With many of the investigations ongoing, and new ones potentially to come, it remains to be seen how successful the taskforces will be, especially given that cost-effectiveness cannot yet be measured. The real test will come when the financial year ends and vital figures become available.