A crackdown on tax avoidance has boosted UK tax revenues by £13 billion – but claims of billions more raised from investigations is just guesswork, claims a leading accountancy firm.
HM Revenue & Customs has revealed that tax inquiries have raised £34 billion, but only 38% of the claimed that amount is hard cash, says new data from UHY Hacker Young.
The remaining £21 billion comes from estimates tagged as ‘revenue losses prevented’ or ‘future revenue benefit’ that are notional rather than real money.
“These measures represent theoretical income made by discouraging taxpayers from attempting to avoid or evade taxes, either this year or in the future, rather than real money collected,” said UHY’s tax expert Clive Gawthorpe.
The main driver behind the extra cash collected is the loan charge introduced in April 2019.
Loan charge boost
Around 50,000 workers who had used a loan scheme to reduce their tax and national insurance must pay tax on 20 years of income this year.
The loans came from companies and were never slated for repayment, which makes them taxable income rather than borrowing, says HMRC.
“HMRC has managed to collect a bumper yield from investigations into individuals but it comes at a cost,” said Gawthorpe.
“HMRC’s approach to the loan charge was heavily criticised for being draconian but it pushed on with its schedule regardless. A bigger cash hoard was the net result.”
He also explained HMRC has improved how to identify offenders to investigate.
“HMRC now has vast amounts of data at its disposal as well as increasingly advanced computer systems which has made building evidence for investigations easier,” said Gawthorpe.
“Our research shows the high level of cash collected could also reflect the results of HMRC’s offshore tax campaign last year. This required individuals to declare any overseas income or gains by September 2018, and pay any liabilities owed, or face penalties of up to 200% of the amount owed.”
HMRC collects data from a range of official sources, like councils and government agencies. External data is becoming more important, such as bank and financial information, social media sites, letting agents and business web sites.