Tax Dodgers and cowboys beware – the tax man cometh…

We didn’t have to wait for George Osborne’s Autumn Statement to learn of the Government’s latest plans to “clamp down on tax dodgers.”

An announcement on Monday that another £77m of funding would be found to enable HMRC to expand their anti-avoidance and evasion activity was swiftly followed by the publication of a document entitled “Closing in on tax evasion: HMRC’s approach”.

Countering offshore tax evasion and avoidance dominates. After all the publicity surrounding multinationals paying virtually no UK corporation tax, it is hardly a surprise that transfer pricing arrangements will increasingly fall under HMRC’s spotlight. More tax inspectors will robustly target wealthy individuals using offshore trusts, bank accounts and “other entities” and a new “centre of excellence” will be formed in conjunction with external specialists with a view to co-ordinating HMRC’s activities in combatting offshore evasion.

Home-based tax evasion and avoidance will also be in HMRC’s sights – the whole area of “aggressive tax avoidance schemes” will be more harshly scrutinised with the promise of new disclosure and penalty powers aimed at what HMRC describes as “cowboy tax advisers” who market contrived or abusive schemes. A special settlement opportunity will be introduced to try to shift the significant logjam of Tax Tribunal appeal cases recently highlighted by the National Audit Office report and improvements will be made to HMRC’s much heralded “Connect” computer system which, we are told, contains a billion records and is already producing excellent results in pulling together the risk profiles of those thought to be evading or avoiding their tax obligations. As well as creating new taskforces and increasing five-fold its criminal prosecution activity, HMRC will from next year seek to identify false identities by testing new data sources provided by the police.

The “Closing in on tax evasion” document contains a timetable of HMRC’s actions in this area for the next six months and in the longer-term. The short-term plan includes some interesting snippets. In the 2013 Finance Bill there will be a measure to obtain information from credit and debit card providers about the businesses they deal with and from February 2013 the first 500 cases where credit reference agency data appears to conflict with income disclosed on tax returns will be investigated.

During the Chancellor’s speech he referred to HMRC’s anticipated collection of an extra £5bn being generated as a result of the recent innovative UK / Swiss tax agreement. Some commentators are questioning whether undeclared monies might have already left Switzerland for more distant jurisdictions. Maybe this is the reason for the promise of further tax transparency agreements with various jurisdictions – according to HMRC, these will reinforce a “ground breaking” agreement with the USA.

So before any cowboys think of riding off into the sunset, HMRC are saying “hands up”, “hold onto your horses”, don’t bother “circling your wagons” because “there ain’t no place to hide”. They have been warned. The cavalry is coming.