Tax investigations reap in £13 billion for the treasury

The latest official data from HM Revenue & Customs (HMRC) shows that the actual cash collected from all tax investigations hit £13 billion in 2018/19.

This was up 27 per cent from the previous tax year in which £10.3 billion was collected. The data also showed that transfer pricing fines for multinationals have risen to £413,000.

The greater yield from tax investigations seems to have been driven in part due to payments HMRC has received ahead of the loan charge being introduced in April 2019.

A considerable amount was also recovered as a result of HMRC’s offshore tax campaign last year.

In addition, technology is playing a greater role in investigations, as HMRC has become more successful at identifying cases for investigation that are likely to result in large amounts of extra tax being collected.

Despite the headline figure, the bulk of this increase is made up of hypothetical estimates, such as ‘revenue losses prevented’ and ‘future revenue benefit’.

Meanwhile, HMRC’s crackdown on aggressive use of transfer pricing has seen the fines imposed on multinational businesses increase tenfold, indicating that the new country-by-country reporting (CBCR) rules are having an impact on compliance.

In 2018/19 HMRC imposed £413,437 in fines, compared to just £45,600 in 2015/16. The clampdown on these irregularities has also helped the tax authority to secure an additional £6.5 billion of tax in the years between 2012/13 and 2017/18.

Link: HMRC annual report and accounts: 2018 to 2019

MTD for VAT filing deadline missed by one in ten businesses

HM Revenue & Customs (HMRC) has reassured the 120,000 businesses that failed to meet the 7 August deadline for Making Tax Digital (MTD) for VAT that the tax authority will not be issuing fines to them for missing the date.

Under MTD, all businesses with a turnover of £85,000 or more must keep computer-based records and file their VAT return using HMRC-compliant software.

The latest figures suggest that around one in four firms failed to meet the deadline, meaning that the taxman could have issued tens of millions of pounds in fines, which could be between £100 and £400, depending on the turnover of the business.

However, HMRC has said that it will adopt a ‘light touch’ approach to penalties in the first instance and, according to officials, the organisation is also giving leeway to businesses because of the possibility of a no-deal Brexit.

Although the taxman is showing leniency now, it has been clear that late filings will be punishable with fines after the ‘soft landing’ period ends in April 2020, even though recent research has found that the majority of business owners say they feel unprepared for MTD.

The research, conducted by YouGov, found that only 12 per cent of business owners said they were ‘very prepared’ for MTD, and 28 per cent of small firms said they were worried about the costs of ensuring compliance. More worryingly, 12 per cent of those polled said they had not even heard of MTD, despite the 7 August deadline, which has now passed.

Link: One in 10 business miss MTD VAT filing deadline