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Jeremy Stretton, HM Revenue & Customs’ Enforcement and Compliance Taskforce Project Lead for its Tax Taskforces, sets out what the Taskforces are doing and what they hope to achieve.

Background

HMRC’s Taskforces were first introduced in May 2011. They are intended to target specific businesses which we have already identified as exhibiting traits indicative of potential evasion activity, ‘clustered’ in a particular geographic area. Once the Taskforce has finished its enquiries in a particular area, it can be re-assigned to a different region.

Each Taskforce has ready access to a core of specialist investigators with extensive knowledge of dealing with cases of suspected tax evasion using criminal and civil sanctions, together with HMRC officers from the particular area which is under scrutiny. I see one of the key advantages of this approach as being that local officers’ knowledge and professionalism will be further enhanced from the experience of working alongside these specialist teams.

In the beginning, the Taskforces would work anywhere from 300 – 600 cases in an area before moving on. The figure seems to have settled around the 250 mark for now but it may well change as different sectors are scrutinised.

Because experience has demonstrated that some of those businesses which are evading tax will also be engaged in wider criminal activities, we also work alongside colleagues who specialise in other areas of compliance enforcement work such as the UK Border Agency, Trading Standards and the Department for Work and Pensions.

How are Businesses Chosen?

Businesses are selected by HMRC’s Risk and Intelligence Service because the information we hold about them indicates that they may be involved in tax evasion activities.  It won’t normally be one specific factor that makes them a priority but a “basket” of risk indicators. Unsurprisingly, HMRC’s CONNECT database features heavily in the process of prioritising businesses for review. CONNECT draws from a very large number of separate databases and information sources.  Some of these are databases held by other government departments or agencies and public bodies, such as the Land Registry or the Valuation Office. We also work closely with other government agencies on specific projects: for instance, when we targeted scrap metal dealers in Scotland, we worked in partnership with the British Transport Police in a number of cases.  But I should emphasise that the information we obtain in this way would always have been correctly and properly acquired through the appropriate “statutory gateway”.  It’s fair to say that the risk indicators don’t always tell the full story and sometimes a business has a perfectly good reason for having the unusual ‘profile’ which has caught our attention. But we can generally tell that’s the case quite quickly and move on minimising the impact on those customers.

What are We Looking For?

Tax evasion: the deliberate suppression and concealment of taxable profits or other tax liabilities such as PAYE on employee wages. We are absolutely not focusing on smaller businesses who might accidentally have underpaid tax; to be candid, that would not be an efficient use of some of HMRC’s most valuable resources let alone fair on our compliant customers. We are instead looking for people who will be completely aware of the fact that they are significantly underpaying the tax that is legally due. To put things in perspective, a number of the business sectors we are targeting feature in our list of the top twenty sectors by perceived tax loss. We categorise them as a threat to the UK economy – that is the order of magnitude we are aiming at. We have of course examined fast food outlets and takeaways in some regions and it`s true that some of those businesses have been relatively small; we have also selected large companies whose turnover runs to several millions of pounds. It is the risk of tax evasion that drives our taskforce activity.

Of course some businesses will go to great lengths to avoid appearing on any government agency’s radar, so to speak. In the past, this might have made a business harder to find. But this is why CONNECT is such a useful tool: the range of information sources it can access means that it is so much harder for tax evading businesses to conceal their activities. We have gone to great lengths to trace these ‘ghost’ traders to ensure that they also get the attention they deserve.

Conclusion

I am pleased to say that the Taskforces have proved enormously successful in detecting and countering tax evasion. We are on target to generate £50 million from our first 12 projects in additional revenue and penalties, and we currently have 30 cases working in our Criminal Investigations teams. I’d like to think that most taxpayers will recognise the work that we are doing is helping to provide a level playing field for those businesses which are complying with their obligations.