Insights

Last week’s news was full of stories relating to major companies – Starbucks, Apple, Facebook and most recently, eBay - and the low tax bills they are able to sustain. Despite appearances what these organisations do to reduce their tax liabilities is perfectly legitimate, allowable under the transfer pricing rules. It is a valid tax planning strategy because for the most part, these multinational businesses have their European operations based in Ireland, where the rate of corporation tax is much lower.

Many are arguing that what they do is wrong and should be investigated and stamped out. However it’s tax avoidance and evasion on a smaller scale that HMRC is currently targeting. To date, HMRC has invested £917 million into tackling tax avoidance and recently announced it has launched another set of new taskforces to tackle the tax dodgers.

Taskforces are special teams created by HMRC to tackle tax evasion and avoidance and they focus on industry sectors and geographical locations where evidence suggests there is a high degree of what HMRC refer to as ‘tax leakage’. As we have discussed in previous articles, the level of intelligence HMRC now has to support its taskforces is very detailed, they have access to bank account information and even have collaborations in place with mortgage providers to identify fraudsters.

Since May 2011, HMRC has launched over 30 different taskforces to focus on specific problem areas. The latest campaigns announced are expected to recover more than £19.5 million and will target the following professions and regions:

-       Legal profession in London

-       Grocery and retail in South and North Wales, the North West and the South West

-       Hair and beauty in the North East

-       Restaurants in the South East and Solent

-       Motor trade in Scotland

During their campaigns, teams will visit traders to examine their records and carry out other investigations. As HMRC have publically stated, “if you have paid all your taxes you have nothing to worry about, but for those deliberately evading tax, be warned that HMRC is coming after you.”

Other figures issued this week by HMRC relate to its ‘tax gap’, which is the difference between what it expected to reap and actual collections. This shows that overall collections activity is improving, with the gap reducing for both individual and corporate self assessment tax returns. Over the past seven years, the tax gap has remained constant at between £31bn and £35bn.

If you have any concerns relating to your tax liabilities, and think you may have underpaid taxes, it is advisable to come forward and contact HMRC before they contact you. In doing so, you will reduce the overall penalty level payable and avoid the chance of a potential criminal prosecution. To find out more please contact Anne Eager at Surrey accountants RJP, by emailing ae@rjp.co.uk.