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HMRC have reacted angrily after the efficacy of their compliance interventions was brought into question by accountancy group UHY Hacker Young, which claimed that the amount generated by the Revenue's in-year investigations into taxpayers’ affairs has fallen by 78%.
According to the company’s analysis of the Revenue’s most recently completed accounts, the department collected £444 tax per inquiry during 2009-10, when interventions were an informal process, compared to £2,057 the previous year.
The number of interventions increased more than tenfold between the two tax years, from 123,000 in 2008-09 to 1,281,000 in 2009-10, while the total the amount of additional tax collected rose by 225% from £253 million to £569 million, said UHY Hacker Young.
HMRC said the company had seriously misjudged the accounts, which in fact relate to tax credits only. 'The accusations... are inaccurate and [the figures] are nothing to do with personal tax,' said a spokesman.
He added: 'By increasing the number of interventions, we have stopped over twice as much money being paid out wrongly, compared to the previous year, with broadly the same size of staff.
'The figures show that tax credit fraudsters are being blocked at the earliest opportunity, and genuine taxpayers are not getting money in error, which they later have to repay. We intend to build on and enhance these interventions over the next few years to help reduce the rate of fraudulent claims.'
UHY Hacker Young had claimed the figures prove interventions are an increasingly unproductive method of improving compliance, and that they are becoming more difficult to justify both in terms of the burden placed on taxpayers and the costs to the Revenue.
Tax partner Roy Maugham said, ‘HMRC are increasingly adopting a blunderbuss approach to interventions. For all the much-vaunted new risk profiling, the department’s hit rate has deteriorated dramatically.
‘The inconvenience for taxpayers caught up in these interventions can be considerable, yet the Revenue seems to be blazing away indiscriminately.
‘Nine out of ten taxpayers contacted by HMRC as part of an intervention have absolutely no extra tax to pay. Everyone accepts that the department has a right to target tax evaders, but the nature of these interventions seems anything but targeted.’
