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Managing serious defaulters referrals rise

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According to Baker Tilly, more than 6,000 tax defaulters were referred to a special HMRC monitoring unit in 2014/15 – a 30% increase on the year before – in a sign that HMRC is getting much tougher on those who deliberately seek to default on their tax liabilities.

The figures, published in response to a FOI request, show that a total of 6,051 individuals and businesses were referred to the managing serious defaulters (MSD) programme in 2014/15, up from 4,624 in 2013/14 and 1,094 in 2012/13.

Under the MSD programme, HMRC closely monitors taxpayers to make sure they file all their returns and make all their payments on time. HMRC’s powers mean it can also make announced or unannounced inspection visits to business premises to check business records or assets and carry out rigorous compliance checks into all or part of a defaulter’s tax affairs. These powers also extend to individual partners, directors or officers of a company, or any business that a known defaulter is involved with. In other words, all business activities of people subjected to MSD scrutiny will be under HMRC’s microscope.

There is no right of appeal against inclusion in the programme and HMRC can continue to monitor defaulters until it is satisfied they are meeting all tax obligations and have changed their previous non-compliant behaviour. For most people, this can last for between two to five years. Serious defaulters include those who have been charged a penalty for deliberately under-declaring income in their tax returns. Recently released data shows that the number of individual penalties imposed almost trebled last year, rising from 5,162 in 2012/13 to 14,401 in 2013/14.