HMRC Seeks Compliance Through “Intrusive Intervention”

February 23, 2011 Taxation in UK

Twenty PenceThe UK HM Revenue and Customs is set to launch a new program which will bombard known tax evaders with extra filing requirements and unannounced financial record inspections, in the hopes of reducing tax non-compliance.

On February 22nd the HM Revenue and Customs announced the launch of the Managing Deliberate Defaulters (MDD) program, which will see known tax evaders placed under greater scrutiny of tax authorities for a period of five years.

According to the HMRC, the program will apply to individual taxpayers and businesses which have been caught attempting to evade tax liabilities of GBP 25 000 or more. The program commenced upon its announcement, and will begin with the HMRC sending letters to approximately 900 taxpayers, with a warning that they are now in the MDD. According to a HMRC statement, taxpayers chosen for the program will face much stricter and more intrusive compliance requirements, including unannounced inspection visits with checks of their financial records, extra information requirements in their tax returns, and higher levels of cross checking between the taxpayer’s business activities. The HMRC will scale the added filing requirements based on the taxpayers’ previous offenses, and will impose “increasingly intrusive interventions” on uncooperative taxpayers. It is envisioned that the MDD will be applied for a maximum of five years on any particular taxpayer, but the time could be reduced to two years in exceptionally positive circumstances.

In an online statement the HMRC said that the program is intended to induce a permanent shift in tax compliance behavior across the UK, deter known tax evaders from repeated offenses, dissuading potential future tax defaulters, and to provide assurance to compliant taxpayers that the HMRC is willing to take action against non compliance.

Photo by Ben Clinch