Calls to HMRC’s Tax Evasion Hotline double
On average, 250 people call
HMRC’s Tax Evasion Hotline every day. The hotline, set up in 2006, has attracted
widespread public attention. A Freedom of Information request has shown that
40,695 people called the hotline in 2017/2018- more than double the number of
reports handled during the previous year.
It is estimated that in the
region of £343,500 was paid to informants in financial rewards for reporting
suspicious activity last year.
The activities being reported
vary widely. From the local builder who is receiving cash in hand, structures
offshore where people stock and hide large amounts of money, or even VAT fraud
on fine art. Whilst the identity of informants is strictly protected, it is
thought that bitter ex-partners or former work colleagues are often the ones
who choose to report tax affairs.
HMRC continue to encourage those
to report their own tax irregularities, and give incentives to those ‘grassing
up’ others who do not follow the same procedure. Informants who tip off to HMRC
could receive up to £1,000 if the information leads to a big win for the
Although every call to the
hotline is investigated, only a small number of the whistle-blowers were
understood to have received a cash reward. That said, the FOI request
discovered that an average payout is 30% higher than it was three years ago.
A spokesperson for HMRC stated that
the payment of rewards is at the discretion of the organisation: “The awards
are based on what is achieved as a direct result of the information provided
and a range of factors determine the amount. The factors include the tax
recovered, the estimate of the loss of revenue prevented and other measurable
benefits such as the time saved in working compliance cases.”
In a statement, HMRC could not
provide precise figures as to how much tax was recovered due to the tax evasion
hotline as reports are often not ‘stand alone.’ However, the tax recovered
£30.3bn via its wider work to crackdown on error, evasion and avoidance.
Penny Ciniewicz, HMRC’s director
general of customer compliance, stated that “intelligence received from the
public makes a contribution to our work, closing the tax gap and funding our
vital public services.”
The Exchequer missed £14bn in
lost revenue to deliberate non-compliance last year. HMRC figures show tax
evasion and the cash-in-hand, or hidden, economy accounts for £8.5bn.
Sources of aggressive tax
planning, avoidance, evasion and non-compliance vary widely. Some of these are listed
below (sourced from Measuring Tax Gaps 2017):
- Taxpayer errors (10%)
- Failing to take reasonable care (18%)
- Differences in how to interpret legislation (18%)
- Organised criminality (15%)
- Evasion (15%)
- Avoidance (5%)
Measuring Tax Gaps 2017 report
interesting statistics in terms of contributors to this so-called –tax gap’
- Small and medium sized businesses (46%)
- Large businesses (29%)
- Criminals (15%)
- Individuals (11%)
What are abusive tax arrangements?
Tax arrangements include any
agreement, understanding, scheme, transaction or series of transactions.Tax arrangements are defined as ‘abusive’
if the arrangements cannot be regarded as reasonable in relation to the
relevant tax provisions. Tax abuse includes:
- the arrangements result in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes;
- the arrangements result in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes;
- the arrangements result in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid;
Who is classed as an enabler of tax avoidance?
An enabler is any person whom in
the course of business or likewise enables abusive tax arrangements that are
defeated. They are said to help in the
design of arrangements, management and marketing of arrangements, as well as
participating in them (for example by enabling them.)
What can the penalties be?
A penalty will only arise when a
tax payer has entered into abusive tax arrangements, and those arrangements
have been defeated. Each person who enabled those arrangements will be liable
to a penalty. Abuse tax arrangements are
defeated when the tax positon is final, and on the basis that arrangements do
not provide anticipated tax advantage. A penalty is payable by each
enabler involved in the abusive tax arrangement. The penalty amount is calculated per case;
value and total sum are all taken into consideration.
Fees, commissions, bonuses or
anything else of value that has been received or receivable by the enabler for
enabling tax arrangements are all taken into account, and come under the term
‘consideration.’ The full amount of the consideration received is included in
the calculation of the penalty, with no deductions for any costs incurred by
As a Regulatory solicitor, I am often asked
about the potential penalties for companies, and individuals, facing action in
relation to tax matters. HMRC’s desire to target all forms of tax evasion shows
no sign of slowing down and the resources being directed towards tackling it
are set to increase.
We help clients by ensuring compliance with regulatory standards in addition to comprehensive legal advice and guidance if proceedings are contemplated or brought against an individual or company. We are more than happy to speak to you with regards to your case. For confidential advice and assistance please call 0113 284 5042 or alternatively email mailto:firstname.lastname@example.org« Go backContact us »