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Technology will unearth tax evasion, warn HMRC

printer Mail

Web robot software will help HMRC to pinpoint tax evaders in a series of new campaigns targeting VAT defaulters, private tutors and e-marketplaces, HMRC have announced. The Connect computer system alerts the department to evasion by matching ‘a vast amount of HMRC and third-party data’.

HMRC announced last month that they were discussing with interested parties an initiative to ‘crack down on VAT rule breakers’, focusing on individuals and businesses who are trading above the VAT threshold but have not yet registered for VAT. They will now seek further input before designing and launching the new campaigns.

HMRC will also focus on providers of private tuition and coaching, people using ‘e-marketplaces’ to buy and sell goods, and traders. Building on the Plumbers Tax Safe Plan, HMRC will offer a disclosure opportunity to ‘another group of tradespeople’.

‘The e-marketplace project has long been rumoured, and will catch anyone who has been consistently buying goods and reselling them in an e-marketplace with the intention of profit,’ said Paul Roberts, Head of Tax Investigations at Grant Thornton. ‘HMRC will not be looking for the occasional sale of private items but at regular trading activity.’

No surprise

Gary Ashford, CIOT representative on HMRC’s Compliance Reform Forum, said: ‘These targeted campaigns come as no surprise, given the government’s high profile target of bringing in an extra £7 billion through initiatives to tackle tax avoidance, evasion and fraud by the end of the Parliament.’

Ashford said HMRC have indicated that they consider traders with reported income continually just under the VAT threshold ‘likely to be evading tax’. But he pointed out that some businesses deliberately keep turnover below the threshold to avoid being VAT registered.

VAT can significantly increase real selling prices and reduce profits where a business sells to individuals, he said, and ‘can be very bureaucratic’.

Criminal investigations

More than £500 million has been raised from voluntary disclosures and a further £100 million from follow-up activity, HMRC said. Previous campaigns have targeted offshore investments, medical professionals and people working in the plumbing industry.

HMRC told the professional body representatives at last week’s meeting of the Compliance Reform Forum that 16 criminal investigations have been launched in relation to the New Disclosure Opportunity and the Tax Health Plan.

Details of the campaigns are now set out on the HMRC campaigns web page.