Friday, 15 April 2016

1,100 tax dodger prosecutions

Here is the counterblast from HM Revenue & Customs, in the face of today's attack from MPs on the Public Accounts Select Committee, accusing officials of not doing enough to tackle tax fraud...

HMRC says it has 1,100 prosecutions of tax dodgers in the pipeline.

Last year it secured 1,200 prosecutions, resulting in prison sentences of 407 years.

Those prosecuted included barristers, accountants, lawyers, bankers, medical consultants, people hiding money offshore, money launderers and smugglers.

Two out of five of those convicted had dodged more than £50,000 of tax.

So what about the criticism that HMRC only has 35 wealthy people either in court or waiting to be prosecuted for tax evasion, despite having 26,000 staff working on enforcement and compliance?

Well, the figure is correct, but the explanation from the tax office is that all of the 35 have wealth of at least £1m.

In other words, the number isn't as small as it looks because the people involved are from a tiny proportion of the population.

Critics will, no doubt, say that this is exactly the well-off part of the population which tax officials need to concentrate on, to make it clear that no one gets an easy ride.

Monday, 11 April 2016

How many avoid Inheritance Tax?

If giving money or other assets to family or friends to avoid inheritance tax is standard practice among the better off, as experts say, why do we have no idea how much of it goes on?

Not one of these bodies has any clue: HM Revenue and Customs, the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation and the Institute for Fiscal Studies.

Just by way of a reminder, you can give away the assets and avoid 40% Inheritance Tax, as long as you live for another 7 years.

Between 7 and 3 years before you pass away there is a tapered rate, so less than 40% is paid.

The only figure that HMRC can provide is the amount of tapered relief which is granted, which adds up to £35m a year.

One suspects that is a tiny proportion of the quantity of tax avoided, legally, by making what are called PETs or Potentially Exempt Transfers.

But the total isn't tracked, because PETs don't have to be registered with the tax office.

The Prime Minster says the exemption allows parents to pass on money to their children, while Labour says it wants the wealthy to pay their tax.

Meanwhile, some accountants warn that imposing Inheritance Tax on gifts made more than 7 years before death could lead to double taxation.

If you give property or shares, they argue, Capital Gains Tax is triggered, while gifts from earnings would have incurred Income Tax.

But can someone tell us how much the Exchequer is losing from allowing PETs?

It would be nice to know.