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July 21, 2021

Fines against finance directors drop sharply

By Joe Pickard

The number of fines issued to finance directors of large businesses by HMRC has dropped sharply from 148 to just 20 in a year, says international law firm Pinsent Masons.

Pinsent Masons suggest that much of the fall in the number of fines is due to HMRC having to shift focus on their investigations away from tax disputes with big businesses to investigating furlough fraud.

In October, the National Audit Office said that up to £3.9bn ($5.31bn) may have been illegally accessed by criminal gangs and employers through the furlough scheme. HMRC has been tasked with investigating this fraud and as a result has shifted many of its tax investigators to this work.

Pinsent Masons partner Jake Landman said: “The investigations into furlough fraud mean HMRC has bigger fish to fry but that will change. As more furlough fraud cases are closed and the lockdown finally ends, we would expect compliance work focused on big businesses to increase.

“HMRC is tasked to bring in as much under paid tax as possible and it still sees large corporates as a major source of extra revenue.”

“Some Finance Directors have felt that being personally fined for a breach of the tax rules they didn’t know about is unfair. However, HMRC see it is way of forcing Finance Directors to take more personal responsibility for tax compliance.”

“When this regime was designed it was decided that a fine levied against an individual director can act as more of a deterrent than simply fining the overall business.”

“Given the complexity of many large businesses it quite a task for the Finance Director to keep on top of all tax compliance. That’s why we have seen an average of over 130 Finance Directors being hit with these fines every year and over 560 in the last five years.”

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