HMRC’s aggresive approach is paying off to the tune of £12.9 billion

TAXPAYERS have paid a 13% more in extra tax as a result of HM Revenue & Custom’s (HMRC) more aggresive approach to collection.

According to York-based accountant UHY Calvert Smith £12.9bn was collected in 2007/08 compared to £11.4bn in 2006/07.

In some areas the increase was even more marked with HMRC pulling in £3.9bn in more corporation tax from compliance activity after targeting big businesses – a rise of 44%.

The firm said that the extra tax resulting from compliance activity was partly due to a more aggresive approach towards tax collection, which it warns is likely to harden further still as pressure mounts on HMRC to prop up falling tax revenues during the downturn.

Mistakes on tax returns, largely due to the growing complexity of the tax system, combined with more sophisticated risk profiling techniques are helping HMRC identify extra tax.

Julia Judson Smith, partnerat UHY Calvert Smith, said: “HMRC has taken a steadily more aggressive stance on reducing non-compliance over the last few years.

“Tax compliance teams have received significant increases in resources in recent Budgets and are now far less likely to negotiate with taxpayers and settle out of court if litigation will net more tax.”

She added that because the tax system was becoming ever more complex due the raft of new anti-avoidance measures taxpaters were finding it more difficult to accurately assess the amount of tax they owed,

“While the Government’s conventional tax take is falling short it definitely seems to be trying to compensate for this by squeezing more money out of tax investigations,” she said.

“With tax receipts forecast to fall in 2009, HMRC may well become even more aggressive in its pursuit of revenue. HMRC has always been one of the main instigators of bankruptcies and liquidations, but with taxpayers suffering in the current climate, there is mounting pressure on it to adopt a ‘light touch’ approach.”

Ms Judson-Smith said that HMRC’s aggresive approach had already been criticised as a likely factor in the growing number of large multinational corporations moving or considering moving their headquarters outside the UK.

“HMRC is really cranking up its activity targeting larger companies. This is a difficult balancing act because if the climate in the UK becomes too unfavourable more multinationals will relocate offshore, potentially damaging corporation tax receipts longer term,” she warned.