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HM Revenue and Customs (HMRC) are hoping to impose new laws to make UK taxpayers and companies notify the Revenue of suspected tax cheats…

HMRC’s Review of Powers, Deterrents and Safeguards have issued a consultation document that could force those involved in an ‘economic transaction’ with a business unknown to the taxman, to name and shame possible tax cheats.

Those who may be questioned by HMRC could include wealthy homeowners paying for cleaning or tidying services with cash.

For example, a wealthy home owner who has a large amount of land with their property, but holds no evidence of a gardener being paid, or a business that has not identified their goods supplier.

Recent proposals from HMRC may have risen in response to their recent tax deal signing with Switzerland and ongoing mission to crack down on UK tax evasion and offshore tax havens.

HMRCs consultation document, ‘Bringing HMRC’s information powers into line with international standards for tax information exchange’, discusses the Revenues proposals to bring a new power into force.

HMRC state that the subject of the consultation paper is to:

“Ensure that HMRC can collect information on specific cases where the full identity of the taxpayer is not known but can be ascertained by reference to other available information.”

(Page 2, ‘Bringing HMRC’s information powers into line with international standards for tax information exchange’ consultation document)

An amendment to Schedule 36 Finance Act (FA) 2008, the new proposal is to bring the UKs standards of exchanging information for tax purposes up to date with those of foreign tax authorities.

HMRCs recent proposals will affect ‘businesses holding data about taxpayers, their advisors, and groups representing taxpayers and other interested parties’.

The consultation document is open for response until 29 September 2011.

The existing FA 2008 gives HMRC the power to obtain names of people, thought to be involved in an economic transaction that should be taxed, from banks and auctioneers.

But the new proposed power would see HMRC given access to more rights and ways of obtaining names of those thought to be evading tax.

In the opening pages of the consultation document, HMRC say that The Review of Powers, Deterrents and Safeguards are extending the Revenues powers to check a person’s tax position, because:

“It is now necessary to extend those powers so that the UK may exchange information to the international standard monitored by the Global Forum on transparency and Exchange of Information for Tax Purposes”

Although advice to change UK laws is not compulsory, HMRC have decided to do so; Making clear that the new law would apply to everyone.

In section 5 of the consultation document, HMRC say that they do not think the proposed legislation change will have a ‘significant impact on data-holders’, and chances HMRC or an overseas authority will want to check the tax position of an unknown identity will ‘rarely arise’.

Adding that, “it is not the Government’s intention to use this power domestically on a large scale”.

Any information requests made by HMRC under the proposed law must be ‘reasonable and proportionate’. Taxpayers targeted by the Revenue can appeal such a request on ‘the ground that it would be unduly onerous to comply’.

HM Revenue and Customs have published 6 questions to accompany The Review of Powers, Deterrents and Safeguards consultation document: ‘Bringing HMRC’s information powers into line with international standards for tax information exchange’

Questions include:

  • ‘Could additional safeguards be introduced for taxpayers who are the subject of an information request from another country without causing the UK to be non-compliant with international standards?’

 

  • ‘Should additional safeguards be introduced to help control the domestic use of any new power?’

 

  • ‘Is there a better way to achieve our policy aim which is not discussed in this document?’

 

(Page 17, ‘Bringing HMRC’s information powers into line with international standards for tax information exchange’ consultation document)

Responses to the consultation on how HMRC should best bring their powers in to line with the International standard can be sent to the Revenue via email or post by 29 September 2011.

Kevin Kinsella Jnr, of KinsellaTax, said:

“I remember going to Oxford for a two day seminar and something which was called the Keith Report.

“The room was awful, they were student rooms, but we attended the seminar mostly filled by HMRC staff and when they read out what the proposals were we were all discussing it saying they would never come into being.

“The Keith Report was eventually produced in two volumes and for anyone who wants to get it from Her Majesty’s Stationery Office the number is CMMD8822, but it was actually published in March 1983.

“Well if you now read the Keith Report, what was proposed then is now the norm. So I have no doubts whatsoever that the additional powers being sought by HMRC will eventually come into law.

“I actually didn’t realise they had been around that long when I asked one of my staff, who’s an FCA of some 30 years standing, whether he knew about the Keith Report. He didn’t – so there you are it shows you how things which are, or seem to be, extraordinary at one time become the norm in other times.”

If you have been accused of tax evasionthen what is the point in wasting any more time and burying your head in the sand?

 

If you leave this or try to deal with it yourself you could be facing a long stretch inside.

Call our tax investigation experts NOW on 0800 471 4546.

For more information on tax evasionplease click here.

KinsellaTax staff consists of ex-HM Inspector of Taxes and ex-HM Custom and Excise Officers, fully experienced in HMRC investigations.

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