HM Revenue & Customs (HMRC) are zooming in on soft targets with tax investigations as they are finding middle-class professionals tend to pay up without protest when challenged with an inquiry.
Tax experts say doctors, lawyers and teachers settle disputes because they worry about their professional reputations when HMRC writes to them about their tax issues.
As a result Tory MP Brooks Newmark, who sits on the Commons Treasury Select Committee, claims HMRC is too aggressive when dealing with taxpayers who may have made genuine mistakes and ‘nit picks’ over the rules.
Newmark suggests that HMRC now go through tax returns with a fine toothed comb and challenge small claims that were ignored in previous years.
“These people may owe a small amount of money to the tax man,” said the MP. “That’s not the point, it’s the angry way HMRC goes about approaching these people who have innocently filled in their forms in error.”
Simple errors punished
Over recent years, as the government has set out to raise more tax to reduce the national deficit, tax experts have seen HMRC focus more on easy targets – especially professionals and landlords as it is easier to extract money from people with assets than those hiding behind the curtain of the black economy.
Mark Giddens, tax partner at accountancy firm UHY Hacker Young explained HMRC makes mistakes but many people prefer to pay up without question rather than challenge their assessments.
HMRC processes around 10 million self-assessment tax returns a year. Many of the errors are when taxpayers complete their own returns and try to calculate complicated issues like capital gains tax, he said.
“Experts find tax hard enough to understand, so how ordinary people are expected to cope is beyond me,” said Giddens.
Extra investigators
“Individuals who are suddenly supposed to know the intricacies of inheritance tax or capital gains will make errors and the tax man should help them rather than come at them like a snarling dog.”
To help raise more money from collecting taxes, the government has invested £900 million in HMRC in recent years. The money has paid for an extra 200 investigators and specialist software to detect tax cheats.
This has been coupled with campaigns directed at ‘risk’ businesses that handle a lot of cash, like pubs, restaurants and the self-employed.
The next target is expected to be directors and employees claiming travel expenses after HMRC won two landmark cases scrapping rules that allow home-based entrepreneurs from claiming the costs of travel to regular workplaces.
“More tax is collected because we have the resources to open more inquiries into inaccurate tax returns,” said an HMRC spokesman.
