Tax Avoidance: UK Missing Out On Billions
The Treasury is losing billions in revenue because officials are failing to clamp down effectively on aggressive tax avoidance, according to Whitehall's spending watchdog.
The National Audit Office (NAO) revealed that HM Revenue and Customs (HMRC) has a backlog of 41,000 cases worth £10.2bn in tax revenue.
They relate to schemes aimed at small businesses and individuals, in what has been described by MPs as "eye-watering" potential avoidance.
The NAO said officials are struggling to cope with the volume of schemes being "mass-marketed", often by small specialist tax advisers.
HMRC believes most of the schemes are not valid and would be "defeated" if tested in court but closing them down can take years of legal wrangling.
Margaret Hodge, the chair of the Commons Public Accounts Committee which oversees the NAO's work, called on HMRC to get a grip on the problem.
"People who pay their taxes promptly and in full will be dismayed to discover that the enormous level of tax avoidance taking place is overwhelming HMRC's efforts to combat it. The scale of the problem is staggering," she said.
"Without a credible plan to resolve these cases and to stamp out future avoidance, the public will lose confidence in the tax system's ability to collect even-handedly what is due from all individuals and companies."
She urged officials to step up enforcement and impose more fines so that they act as a deterrent.
Experts who design and sell such schemes have to notify HMRC under a regime known as Disclosure of Tax Avoidance Schemes (Dotas).
The NAO said this had helped target legal loopholes but that it had little effect on the overall scale of tax avoidance activity.
"There is little evidence that HMRC is making progress in addressing this problem and it must now be vigorous in seeking more effective counter-measures, proposing legislative change where necessary," it said.
Between 2004 and 2011, around 2,300 avoidance schemes were disclosed to HMRC, with over 100 new schemes emerging in each of the past four years.
Since April 2010, litigation has been opened in 110 avoidance cases. Of the 60 cases where judgments have been reached, HMRC was successful in 51.
The NAO said there was no evidence that this level of litigation was proving an effective deterrent.
Its chief, Amyas Morse, said: "HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes.
"It is inherently difficult to stop tax avoidance as it is not illegal. But HMRC needs to demonstrate how it is going to reduce the 41,000 avoidance cases it currently has open."
HMRC said it had successfully challenged more than 40 avoidance schemes in the courts over the last two years, protecting around £4bn, but admitted it had to stay vigilant.
"As the avoidance landscape changes, so must our approach. The Government is building on Dotas to give HMRC stronger powers to obtain information," a spokesman said.
"These, together with the introduction of an anti-abuse rule in 2013, will further strengthen our anti-avoidance work."
what do you think?
Scrap Corporation tax, its too hard to collect from multinational Co's & put VAT up. Corporation tax & vat are both costs to a business, they cant dodge vat in the uk.
Now you are talking Grant and think there is a secondary effect as it would attract foreign investment and firms so up goes employment and up goes tax take. Credit here grant you have come up with something which would be worth looking at.
Would that then not get passed onto the consumer pushing overall charges up then, inturn people would not use the business as the vat charges would be too high, there must be a better way of collecting corporation tax, if you trade within a country you should pay your fair wack off tax
michael spin this one on its head and consider that if by scrapping corporation tax it attracted more companies and inward investment then you increase employment the revenue take would rise from the increase in disposable income without increased VAT
I should have added HM Revenue would not be spending so many resources trying to squeeze corporation tax and concentrate on tax evasion
Couldnt have put it better blue side. Michael C - corporation tax is a cost to a businesses & they build that in to their pricing too, passing it on to the customer to, so vat wont be much different. With all the new vat flowing in, image how they could then reduce income tax for workers....
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Lee Wright Addy
The whole problem is caused by overtaxing in the first place. Whitehall needs to get its head round spending less full stop.
Those who have marked Grant down should look at the sums based on what he is saying. Lee also makes a valid point it has in the past been proven that when tax rates are lowered revenues increase. I also wish that either Sky or the Chancellor would get off this AVOIDANCE kick and use the term which is most applicable and that is EVASION.
Grant. You are right. Surely anybody can see it. Overtaxing kills an economy
It won't help abolishing Corp tax and putting it on VAT. The majority of businesses in this country are small and pay a low amount of Corp tax as a result of small profits. If you then scrap this and put it on VAT you'll end up killing off small businesses. Don't forget that although the last VAT increase was only from 17.5% to 20% it had the effect that business' actual contributions increased by over 14%!!
Stop foreign aid then that will save a few billion what a joke country we are I laugh at it now
O how true. As an alternative give it in credits to be spent with British firms
Windows Live User
How can these people still be in a job? C'mon Cameron this is really one process you need to short circuit and get the money into our coffers. Mind not to give to overseas, but to Britain!
Google fraud indicators then look at page 11 of the pdf you will see tax fraud stands at 14 billion UK pounds - far more than any other fraud
Greg that is not avoidance that is evasion and should be the target
More political hype so squeeze the last drop and loose the revenue - so lets tax the ISA, Pension plan and endowment policy because they all have elements of tax avoidance which is prudent planning. Now if they said tax evasion that would be different.
are they going to actually close the loop holes and get the money back whats owed or just talk about it as usual. if they want to save money stop giving it as aid to other countries when they're better off than us and clamp down on immigrants coming over here and claiming benefits they've not earned or paid into
Big bizzohs avoiding tax? Surely not! Don't make me laugh; I;ve got a bad back!
Conservative party policy. Take care of their wealthy friends, make up for the tax shortfall by taxing the powerless more. There is no reason at all for people who are not members of the Cameron No.10 breakfast club to vote Tory. And the more public sector workers they sack, the more unemployed, less money being spent, more business go under, more priuvate sector workers sacked.
tax everybody harder (or borrow) then the government can employ more. Businesses going under, who cares?
I will not purchase products from, or use the services of corporations that engage in aggressive tax avoidance. I live in a democracy (so far) and exercise my right to not finance corporations whose actions I regard as immoral. I am not alone.