Danny McCance 19 Aug 2019 04:43pm

Tax collected from investigations up 27%

HMRC made more than £13bn worth of actual tax collections from tax investigations in 2018/19, a 27% increase on the previous period

In its annual figures, the Revenue reported the figure for cash expected at just under £13.14bn.

The actual cash collections from tax investigations increased by £2.7bn from £10.3bn for 2017/18. That year, the compliance yield was actually lower than the previous period (£10.34bn in 2015/16).

This cash, the revenue stated in its report, was “additional revenue due when [HMRC] identify past non-compliance, with a reduction to reflect any revenue we know will not be collected (for example, in some instances when a business becomes insolvent)”.

The cash collected constitutes over a third of HMRC’s £34bn compliance yield for the period, with the remainder being made up of future losses prevented; future benefit; product and process analysis; and accelerated payments.

Clive Gawthorpe, partner at UHY Hacker Young said, “HMRC has managed to collect a bumper yield from investigations into individuals but it comes at a cost”.

According to Gawthorpe, the increased yield could be attributed to the controversial loan charge, which he described as “draconian but [HMRC] pushed on with its schedule regardless”.

The loan charge came into effect on 6 April and applies to anyone who had used a so-called disguised remuneration scheme.

It included a 45% non-refundable charge on loans advanced through any such scheme, however those involved were given the chance to settle with HMRC before the April deadline.

In its annual report, HMRC highlighted that it had written to more than 40,000 people that it believed could be affected by the charge. The charge would apply to any disguised remuneration loans outstanding on the 5 April 2019 deadline.

“Since then we have agreed on around 7,000 settlements, worth more than £1.5bn. We have introduced simplified tax payment arrangements for those settling under the published settlement terms,” the report stated.

UHY Hacker Young said another explanation for the bumper compliance yield could be HMRC’s recent offshore tax campaign – under which it said taxpayers needed to claim income or gains by September 2018 and pay their liabilities or risk “up to 200% of the amount owed”.

HMRC clarified that its offshore tax campaign was just one of a number of initiatives that will have contributed to an increase in cash collected.

The group also pointed towards advances in collecting data and building evidence for investigations at the Revenue’s disposal.

“Over the last couple of years, HMRC has used a huge variety of sophisticated measures to help boost cash collected from investigations. Technology is playing an increasingly important part in identifying cases and it integration into the compliance process is set to continue,” Gawthorpe said.