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I have been pondering the implications of the freedom of information request made by UHY Hacker Young which revealed that almost 40% of civil investigations launched by HMRC between 2019 and 2022 did not result in any ‘compliance yield’, ie no additional tax was found to be payable. Is this good or bad news?
From the perspective of those who were investigated, it must have been galling, to say the least, to have to deal with the emotional strain of going through an HMRC investigation (to say nothing of the time and cost involved) in order to show that there was nothing wrong in the first place.
But what about the wider public policy issues? If every HMRC investigation resulted in a compliance yield, that would either point to 100% accuracy in the selection process – unlikely – or officers never letting go until they had found something wrong.
Certainly in the dim and distant days when I was an inspector of taxes, it was unusual for many investigation cases to be closed without additional tax becoming payable.
We were encouraged to drop cases early if there was nothing in them, but there was always that feeling that if you closed too many cases in that way you weren’t being tough enough. That voice gnawing away in the back of your mind which says ‘just ask one more question and the case will be blown wide open’ is hard to resist.
Perhaps 40% is too high but I, for one, am glad that cases are closed without additional yield. It does reflect a reasonable balance between the state and the individual – something much to be encouraged.
If you do one thing…
Read para 18 of the First-tier Tribunal decision in Duncan (tinyurl.com/ftttc8889). It may well strike a chord!
