UK Taxman too slow with celebrities and companies, says Public Accounts Committee

The UK Taxman has been criticized for being unacceptably slow in getting tax money from tax avoiders, especially celebrities and companies, says the Public Accounts Committee.

Committee chair, Margaret Hodge, said HM Revenue & Customs’ lack of action was undermining tax revenues. “HMRC must do more, faster,” she added.

The Committee gave as an example a tax avoidance scheme known as Liberty, which was closed down five years ago but did not come to a tribunal until 2014.

Mrs. Hodge believes the Liberty example could be “the tip of the iceberg”.

Mrs. Hodge, Labour MP for Barking since 1994, said the Liberty scheme built up to £10 million of the total £400 million tax at stake from 2,000 users in taxes that will probably never be recovered, because HMRC initiated enquiries after the 12-month deadline period.

Liberty, a tax-avoiding investment scheme, was allegedly used by dozens of celebrities, including George Michael, Gary Barlow and Katie Melua. It may have diverted £1.2 billion that should have gone to the Treasury.

Margaret Hodge

Mrs. Hodge says HMRC has been too slow.

According to HMRC, the delays in recovering tax money withheld by individuals who took part in tax avoidance schemes were partly due to tactics used by the scheme promoters.

Mrs. Hodge said:

“Although HMRC says Liberty was an exceptional case among the 750,000 personal tax return inquiries each year, it was unable to tell us how much delays had cost across the different tax avoidance schemes.”

The Committee also criticizes the UK tax authorities for dragging their feet on information regarding the Falciani list, which includes details on 3,600 Brits who may be dodging taxes using bank accounts in Switzerland.

The Parliamentary Committee has told HMRC to make full use of the extra powers granted to it by parliament to fight tax avoidance and report back on its progress.

Regarding UK companies, Mrs. Hodge said:

“Some international tax experts believe that the UK’s tests for companies to gain tax residency are less rigorous than in other EU jurisdictions. Research into seven companies who have recently relocated to the UK for tax purposes showed very little inward investment was generated or jobs created in the UK in return for the tax benefits the companies receive.”

“HM Treasury and HMRC should provide the committee with details of progress in identifying and addressing the ways that international tax structures are exploited, and set out the actual costs and benefits of recent changes to the UK’s tax regime.”

In its report – “HMRC’s progress: improving tax compliance, preventing tax avoidance” – the Committee wrote::

“HMRC should be more transparent about its compliance yield estimates by publishing more detail about how it calculates compliance yield, being clearer about how much it has actually collected in cash terms and explaining how uncertainty affects its estimates.”

“There has not been consistency in the way HMRC has measured compliance yield which makes it hard to hold HMRC to account for its performance over time.”