Tax dodgers face five years of extra scrutiny

Image caption,
The crackdown also aims to deter would-be tax evaders

Tax dodgers face far greater scrutiny of their affairs under a new HM Revenue & Customs (HMRC) plan.

The Revenue says anyone who evades tax will have their financial affairs watched closely for up to five years to make sure they do not re-offend.

The plan is called the Managing Deliberate Defaulters (MDD) scheme.

It comes on top of increased fines and the imminent naming and shaming of people who have tried to avoid at least £25,000 of tax.

The new plan will start with letters being sent to 900 known tax dodgers warning them they will stay in the Revenue's sights for up to the next five years.

But HMRC made it clear the plan was aimed as much at deterring would-be tax evaders as those who have already been found out.

"Tax cheat check-ups will involve continued and close scrutiny - it is a real deterrent," said Steve Hickman of the HMRC.

"If you are thinking about breaking the rules just remember, you could end up with HMRC on your back for five years."

'Increasingly intrusive'

The Revenue said the extra scrutiny would probably last for at least two years for any individual. Its measures might include:

  • making announced or surprise inspections of books and records
  • asking additional information or documents to be sent in with the person's tax returns
  • carrying out in-depth compliance checks into all or any part of the person's tax affairs
  • observing and recording the person's business activities and cross-checking details in their accounts
  • requiring more frequent VAT returns or cancelling certain favourable VAT schemes for miscreants.

"Evaders who fail to keep their tax affairs in order will face increasingly intrusive interventions from HMRC and if deliberate evasion continues, HMRC may also start criminal proceedings," HMRC said.

The new attack on tax dodgers was welcomed by the Chartered Institute of Taxation (CIOT), which pointed out that it applied to businesses as much as individuals.

"The MDD programme will apply to businesses and individual taxpayers who have been found to have made a deliberate understatement resulting in a tax loss, unless the penalties charged have been reduced to the minimum allowed through both unprompted disclosure and co-operation with HMRC," said Gary Ashford of the CIOT.

"Where the tax loss is over £5,000, HMRC will send a letter to businesses in the MDD programme requiring additional information to be submitted along with their tax returns for the following five years," he explained.


Ronnie Ludwig, of accountants Saffery Champness, said: "We have had the carrot approach from HMRC by way of various tax amnesties, and we are now seeing the stick."

"The question remains whether, with current cutbacks, HMRC will be given the resource needed to police this initiative effectively," he added.

Ordinarily, tax offenders can be fined up to 100% of the tax they have avoided, plus the payment of the back taxes plus interest.

Offenders who have been trying to evade tax in some offshore jurisdictions now face fines of up to 200% of their unpaid tax.

The worst offenders, those who have tried to dodge tax of more than £25,000, will start to be named in the coming tax year.

And the Revenue has the option of prosecuting offenders, which can lead to them being sent to jail if convicted.

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