The Treasury’s much-hyped clampdown on ‘tax avoidance’ might not end up being as effective as officials originally planned, with so many experienced HMRC investigators likely to retire over the next five years.
According to an article in The Telegraph last Friday, around one third of investigators at HMRC’s enforcement and compliance division are aged between 50 and 59. This fact, combined with heavy staff cuts made over the past few years, is likely to undermine the Government’s efforts to extract extra funds from tax avoidance compliance activity.
HMRC has already cut 39,000 posts since 2005, and is expected to shed a further 10,000 over the next three years.
The Chancellor has famously provided an extra £917m to HMRC to help close the ‘tax gap’ between taxes owed and taxes collected.
Figures released last week show that the tax gap is currently around £32bn per year, comprised of tax evasion (£5bn), criminality (£5bn), the hidden economy (£4bn), and ‘legal interpretation’ (£:4bn). The remainder is made up of errors, non-payment, and a failure to take reasonable care.
Although the tax gap – as a percentage of the total tax take – has steadily declined over the past few years, it still represented 6.7% of the total 2010/11 tax take.
Income Tax, NICs and CGT accounted for 45% of the total lost tax during the 2010/11 tax year, unpaid VAT accounted for 30%, and Corporation Tax for 13%.
- GAAR – Treasury clampdown on tax avoidance schemes
- HMRC increases IR35 investigation efforts
- Most complaints made to HMRC are upheld
- New HMRC IR35 business test could be published in April
- HMRC publishes IR35 business entity test and scenarios
- ClearSky Accounting - specialist support for contractors
- Visit Hiscox for Professional Indemnity and Business Liability Insurance
- Contractor Finance - up to £30,000, when you need it
- InTouch Contractor Accountants - Personal Online Accounting
- Join PCG - Free impartial start-up advice for contractors.
- Visit Qdos Consulting for tax investigation cover and IR35 insurance.
- 90% Pay Retention for Contractors - Helix Management Ltd