New HMRC data shows the total extra tax collected through tax investigations and other compliance work increased 15% last year to a record £48bn up from £41bn in the year before says multinational law firm Pinsent Masons.
The extra cash expected to be delivered from those tax investigations also rose sharply to £14.2bn from £12.4bn. HMRC has been set ambitious targets by the Government to increase its number of tax investigators and tax investigations.
Corporation Tax investigations into the UK’s largest companies generated £6.15bn in extra tax compliance yield last year — a dramatic increase, nearly double the £3.19bn the year before.
Abigail McGregor, Legal Director at Pinsent Masons says: “This is a dramatic increase in yield from tax investigations, with the biggest uptick being in what HMRC describe as “upstream operational yield”, being what they consider to have been protected from non-compliance before it occurs.”
“To keep delivering increases, HMRC will have to continue to increase its number of investigations/active focus areas or increase the amount it is able to gather from each investigation.”
“When HMRC opens an investigation into one area of a corporate’s tax affairs it often spreads to aspects of their tax position, including PAYE and VAT.”
“With the Government wanting to raise tax revenues but politically constrained from hiking headline tax rates, ramping up compliance activity is one of the few levers left. Individuals and Companies are likely to face even greater scrutiny in the next 12 months.”
McGregor explains that HMRC is deploying increasingly sophisticated tactics to raise compliance and yield, including:
- Digital prompts or ‘nudges’ sent to taxpayers when their filings don’t match HMRC expectations — which helped 6 million taxpayers correct returns last year and raised £448m in additional tax.
- Using Customer Compliance Managers for the largest businesses to identify emerging tax risks and seek to resolve disputes earlier, while recognising that disputes have moved into complex and novel areas of tax law that may require litigation to conclude.
- Naming and shaming tax avoidance schemes — HMRC published details of 83 schemes, 82 promoters and 26 connected individuals, and issued 40 ‘stop notices’ ordering promoters to cease marketing tax avoidance vehicles.
