The most recent information about the additional funds generated by HMRC as a result of tax investigations show that a recorded £16.5 billion has been reported by HMRC as the tax, interest and penalties generated as a result of tax investigations into tax avoidance and evasion.

The statistics are reported to show that the biggest contributor to this tax investigation yield related to tax investigations into companies. These tax investigations (also known as corporation tax enquiries) are reported to have generated over £4.5 billion.

These tax investigations (which will probably include figures from some things most people would not class as from tax investigations) is reported to have increased from £12 billion in 2009 to £16.5 billion in 2010. By far the biggest amount relates to tax investigations into companies which have been reported as being in excess of £4.5 billion.

So how has this extra income from Tax Investigations occurred? HMRC is under huge pressure to increase tax receipts at a time of cuts in the departmental budget. HMRC has convinced the government to put extra resources into tax investigation work as part of an ongoing strategy which has resulted in draconian new tax investigation and information gathering powers as well as a dramatic increase in penalties for even a small mistake such as making a payment a day late.

HMRC have launched a number of tax investigation initiatives for people with offshore accounts, plumbers, teachers, medical practitioners and more recently electricians and in effect given these people the opportunity to put their tax affairs in order. HMRC also have ongoing long term “tax amnesties” such as the Liechtenstein Disclosure Facility and the recently agreed treaty with Switzerland. Although these tax investigations appear to have ever diminishing returns it seems that these have helped to boost the tax investigation take for HMRC.

Included in these figures are items HMRC will class as tax avoidance and mistakes which HMRC class as tax investigation yield. Much of this can either relate to genuine disputes over the interpretation of what is a very complex tax system. Whether these should truly be recorded as the results of tax investigation which implies that there has been the intent to commit tax evasion or tax fraud is open to question.

HMRC have also set up specific tax investigation units to target high net worth individuals, people with overseas property and even people who move house more than once every few years.

There is no doubt that HMRC have finally started to get their act together with regards to tackling tax fraud and that they have been using their information powers to obtain mountains of information from various sources and also they have begun to use computer modelling to try to target people for a tax investigation where they have a reasonable suspicion of tax evasion. However, worryingly this also appears to have come with a much more aggressive stance in tax investigations and many people end up being faced with paying sums as a result of tax investigations which they do not believe are due as HMRC are much more keen to take matters to the tax tribunal and the costs of this with regards to tax investigations can be so high that it is cheaper to pay HMRC to settle the tax investigation than to defend the matter before the tax tribunal.

Given the complexity of the current tax system and the scope for differences of interpretation, any detailed HMRC investigation stands a reasonable chance of finding some element of under-declared tax somewhere in the affairs of an individual or a business. In addition the costs of proving innocence in professional fees and potentially tax tribunal costs means that a significant minority of businesses chose to make payment to HMRC to close the tax investigation rather than fight the accusation of wrongdoing. This is then reported as the results of tax investigation work and used to boost the argument for even more resources to undertake more tax investigations.

In this new world of tax investigations and HMRC powers it is ever more important that people who are subject to a tax investigation seek specialist advice.

Gilbert Tax Will deal with HMRC for you

For most people, the simple thought of having to deal with an Tax Investigation or disclosing tax evasion is so terrifying that they avoid the issue altogether and often find themselves in even greater tax evasion difficulties with higher bills than they need to. There is no need to let problems large or small with the HMRC escalate to the point where your quality of life and happiness suffer.

At Gilbert Tax, we have over eighty years experience in finding closure for clients dealing with Inland Revenue investigation and significant experience in dealing with the offshore tax evasion issues. We are also skilled in negotiating with HMRC, relative to tax evasion, so as to avoid or limit financial penalties for the individuals or businesses who find themselves subject to a tax investigation.

For a private discussion of your tax investigation matters, please call Gilbert Tax on 0800 734 3333 or email us at enquiries@gilberttax.co.uk.