Managing deliberate tax defaulters
HMRC have launched a new programme which seeks to closely monitor the tax affairs of individuals, businesses and companies that have been classed as deliberate defaulters (DD).
This new measure is in addition to existing legislation which allows HMRC to publish the names of taxpayers who have been penalised for deliberately:
- Understating tax due, or overstating claims or losses, of more than £25,000.
- Failing to notify HMRC when required to do so, leading to a loss of tax of more than £25,000.
- Committing certain VAT and excise wrongdoings, leading to a loss of tax of more than £25,000.
Any taxpayer classed as a DD may become part of this enhanced monitoring and activity programme known as Managing Deliberate Defaulters (MDD). Taxpayers placed in the MDD will be subject to checks of their entire tax affairs which can last for up to five years. Taxpayers who make a full unprompted disclosure will not be placed into the MDD programme subject to certain conditions being met.
There are a variety of measures HMRC may use to monitor a DD’s tax affairs.
- Making announced or unannounced inspection visits to carry out pre-return checks of books and records.
- Asking for certain records so that they can be checked.
- Requiring that additional information or documents be sent in with the relevant tax returns.
- Conducting in-depth compliance checks.
- Observing and recording business activities and cross-checking details in their accounts.
- Require submission of quarterly or monthly VAT returns.
- Require the same accounting periods for VAT and Income Tax or Corporation Tax.
- Withdraw the use of certain schemes if deemed necessary for the protection of tax revenue.
Taxpayers who fail to keep their tax affairs in order will face increasingly intrusive interventions and HMRC may also start criminal proceedings.