There has been a 17% increase in the amount of extra revenue generated by HMRC’s specialist task forces in just a year to £541m in 2018/19, up from £464m in 2017/18, according to law firm Pinsent Masons.
Task forces are used to target certain industries or professionals where there is a strong suspicion that tax evasion is endemic. There have been 360 task forces created since 2011. They are drawn from HMRC’s most experienced staff who are specialists within their particular industry. This pooled expertise and narrow focus on specific industries make these teams more likely to identify the best cases for investigation with the highest possible financial yields.
Pinsent Masask forces often target businesses by making unannounced site visits, either through a dawn raid to search the premises or through covert undercover visits. Alternatively, a notice of inspection might be served at short notice. During visits investigators will often push business owners for a full interview before they can seek professional advice.
Sectors that task forces have specifically focused on include:
- Street markets in London
- Fast food outlets in London
- Buy-to-let landlords in the South East
- Taxi firms in Yorkshire
- Tobacco industry
- Alcohol industry in Scotland
- Scrap metal dealers in Scotland
- Holiday industry in Cornwall
- Hair and beauty businesses in Northern Ireland
- Construction industry
Josie Hills, Senior Tax Manager at Pinsent Masons, said: “Task forces are an increasingly important element of HMRC’s strategy for tackling tax evasion before it materialises.”
If a task force investigator determines that a taxpayer is guilty of evasion, they will likely demand any unpaid tax, plus a possible substantial fine on top. Task forces are also an important method for HMRC in meeting its target for criminal prosecutions. The use of taskforces comes as HMRC pivots strategically towards preventative methods to tackle tax evasion rather than reacting after it takes place.
Another preventative measure HMRC uses to encourage taxpayers to be tax compliant is issuing thousands of “nudge letters” to individuals who have or had offshore and onshore financial interest. Automatic exchange of information between tax authorities means that HMRC now receives information every year about overseas accounts held by UK residents.
Nudge letters ask taxpayers to make a declaration that they have declared all their offshore income, assets and gains which are taxable in the UK or that they will make a disclosure of any irregularities.
Josie Hills, added: “Task forces are proving to be very effective and HMRC will no doubt be looking at how it can increase the use of them. Taxpayers and business managers should not assume that they will slip under the radar. Many business owners may not be aware of what alternative action they can take when approached by an investigator and are likely to be bewildered by an unannounced on-site visit. Seeking advice before responding to questions or providing documents is of upmost importance. Anyone receiving a nudge letter should seek urgent professional advice from a tax investigation expert. Ignoring it is not recommended and signing the requested declaration is unwise as it is not required by law and covers all tax years with no exclusion even for very minor errors."