HMRC criticised for slow action against tax evaders

The Public Accounts Committee has accused HM Revenue and Customs (HMRC) of being “unacceptably slow” in taking action against tax evaders.

Margaret Hodge, chair of the Public Accounts Committee, believes HMRC’s inaction was currently putting tax revenues at risk; highlighting a tax avoidance scheme closed down in 2009 that was only taken to a tribunal this year.

The Labour MP said up to £10m of taxes avoided by 2,000 users of a scheme known as ‘Liberty’ may not be recoverable due to the fact that in 30 cases HMRC failed to begin inquiries into personal tax returns within the 12 month deadline.

“Although HMRC says Liberty was an exceptional case among the 750,000 personal tax return inquiries each year, it was unable to tell us how much delays had cost across the different tax avoidance schemes,” said Hodge.

Committee members have also voiced concerns about HMRC’s slow progress in acting on information relating to the Falciani list; which identified 3,600 UK individuals thought to be avoiding tax via Swiss bank accounts.

Even further afield, MPs also claimed HMRC failed to adequately solve the issue of UK companies taking advantage of international tax structures in a bid to reduce their liabilities on home soil.

“Some international tax experts believe that the UK’s tests for companies to gain tax residency are less rigorous than in other EU jurisdictions,” said Hodge.

“Research into seven companies who have recently relocated to the UK for tax purposes showed very little inward investment was generated or jobs created in the UK in return for the tax benefits the companies receive.

“HM Treasury and HMRC should provide the committee with details of progress in identifying and addressing the ways that international tax structures are exploited, and set out the actual costs and benefits of recent changes to the UK’s tax regime.”

An HMRC spokesman said: “The committee recognises we have addressed their key comments about tax avoidance.

“The way we now work makes it clear to promoters and users of schemes that we will robustly tackle tax avoidance wherever it happens so increasingly taxpayers are contacting us to help disentangle them from schemes that simply do not work.”

The spokesman added that since 2010 HMRC had recouped £31bn from large businesses and is challenging multi-nationals.

“We will work closely with the National Audit Office to ensure there is no repeat of the base line error for which we apologised to the committee.

“However, even taking this into account we exceeded our targets for tackling tax dodgers and criminal gangs every year since 2010.”

Date published 18 Nov 2014 | Last updated 18 Nov 2014