Where Spring Budget 2023 says the taxman’s gloves are coming off

If it’s ever crossed your mind that HMRC is too tough on errant taxpayers, you haven’t seen anything yet because according to Spring Budget 2023, the taxman’s gloves are coming off, writes former tax inspector Carolyn Walsh.

At least that’s the upshot, surely, of the government using the chancellor’s Spring statement to stump up a further £47million to boost HMRC’s capabilities for managing tax debts.

According to the announcement on Wednesday, the investment will allow HMRC to “better distinguish between taxpayers who can afford to settle their tax debts but choose not to, from those who are temporarily unable to pay”.

R&R, of a different kind

So the focus of this government looks like it’s going to be to invest in 'revenue and recovery,' with a view to closing the ‘tax gap’ by encouraging us to be more efficient in the way we account for and pay tax liabilities. There is then, in addition, many millions for HMRC to track down the hidden assets and income of people who can afford to settle their tax debts, but choose not to.

But the gloves are coming off against avoidance scheme promoters too, not just the “temporarily” unable to pay and the unwilling.

That said, the consultation on the government’s plan to send the promoters of tax avoidance schemes to prison is not unexpected. The oft-sneered at HMRC avoidance list documenting who is peddling what scheme is a passive resource, but avoidance promoters ignoring ‘stop’ notices should indeed be criminals (as the Budget proposes), on the basis that they detrimentally impact the UK and its public finances.

More gloves off

Spring Budget also says jail-time for fraud is being doubled to up to 14 years. More gloves off. Well, good because tax fraud really is not a victimless crime. Loan scheme providers were partly responsible for leading ten people to suicide and many more to bankruptcy, with the rest given mental illness, marriage break ups, and tax debts which take many years to repay.

Problematically, the loathsome individuals behind schemes tend to live in Dubai, or other countries that are beyond the reach of the UK’s criminal justice system. The government needs to put other measures in place. For example, it should seize assets while carrying out extradition procedures, and not just against ‘Mr Big.’ Rather, the government should hit those people within one degree of separation to the scheme promoters. So that would be the spouses, children, and people who ‘stand in’ for the promoter-individuals, often as shadow directors. Remember, the gloves ought to come off against these parties, as well, because all of them have benefited from the high life for years, with no interest at all in where the money comes from.

Dodgy brolly directors at risk too...

The Revenue has been pushing for this line of attack for years, but it’s not just the multimillionaires and masterminds one might associate with Dubai who risk getting thumped. There’s also the dodgy accountants who promoted Flat Rate VAT fraud, and the umbrella company bosses who made a king’s ransom from ‘beat-the-taxman’ type schemes, including bosses who eventually went on the straight and narrow. The HMRC consultation promised at Budget 2023 could lead to these dodgy brolly directors and accountants getting pummelled by the taxman because he has a very long memory -- up to 20 years. And I believe there’s a special place in Whitehall where the memory of such rogues has never dimmed.

Very finally though, perhaps it’s time some of us advisers to contractors take our gloves off against HMRC, and even the business department. In fact, in absence of the Single Enforcement Body, I myself might challenge the departments on their handling of the umbrella market. Why shouldn't these departments’ officials do some work to clean up what has been a mess for far too long? As I’ve previously told ContractorUK, even the latest apparently improved umbrella company guidance from HMRC is still too convoluted for people to understand.

The KIDs are alright (three years later)

But it does now appear that at last one piece of worthwhile guidance for workers – the Key Information Document – is becoming more of a must. Even by industry bodies meant to be dedicated to compliance, I was ignored when I raised the issue of KIDs being ignored. But almost all umbrellas I come across are now proclaiming the KID as being important in tackling avoidance and determining umbrella compliance. Hallelujah. It’s only taken three years for umbrellas to cotton on to what’s been a requirement since April 2020, albeit very softly-softly policed. And for those of us who were flagging up KIDs before they took effect, it’s been a very long three years. Maybe HMRC is onto something. Gloves-off it is then.