Financial Matters

With David Frederick FCCA | Marcus Bishop Associates | marcus-bishop.com

How will they find out?

HMRC tax investigations have been ratcheted up since the end of the Covid-19 support from central government. This comes as no surprise as the Treasury are driving HMRC to reduce the tax gap or what is fast becoming the tax debt mountain. The mountain of debt grew during the period of covid aided by the introduction of the Bounce Bank Loan (BBL) scheme. The BBL scheme would soon be considered by fraudsters as a free money scheme. This is evidenced by the numerous fraudulent BBL applications that have been uncovered post covid. HMRC has recently achieved its first successful BBL scheme criminal prosecution. In addition, since April 2022, HMRC has introduced some new checks targeting taxpayers in certain sectors deemed high risk of evasion due to the proliferation of cash transactions. Consequently, minicab drivers, taxi drivers and scrap metal merchants had to confirm to HMRC that their tax affairs was compliant before they were able to renew their licences from the local licensing authorities. Any license holder with underpaid taxes or not compliant were subjected to a loss of their licence and the risk of criminal prosecution. Although, HMRC expects this new approach to save some £270m of tax evasion over the next five years. The saving of £54m pa is miniscule when benchmarked against the £32bn tax gap. Maybe it is this miniscule impact on the tax gap that leads errant taxpayers and fraudsters to ask rhetorically, “how will they (HMRC) find out?” The truthful answer is, it is not a question of finding out but why should taxpayers not be compliant? HMRC has a variety of information sources to identify, undeclared income, including Connect its sophisticated software. However, HMRC don’t need recourse to Connect in many cases because most taxpayers lack any form of sophistication and are just awaiting HMRC detection. Some basic HMRC approaches include: • Social media observation or roaming • Information from other government departments • Information from relatives or the general public • Business investigation The sad reality is most taxpayers lack the sophistication, skills and financial resources to outwit HMRC. A common example of deliberate non-payment of taxes arises from residential property landlords who let out their property via an estate agent. Many of these landlords are oblivious to the fact that letting agents make an annual return to HMRC identifying landlords, rental properties and income earned. Moreover, some letting agents even itemise this service on their monthly statement to landlords. Despite this, landlords are super confident they can outwit HMRC. These landlords are paying their letting agent to report them to HMRC but they believe they are untouchable. In addition, there are the landlords who are obsessed by paying cash to tradespeople, to avoid 20% VAT. They often receive a nasty shock when they are advised by their accountant that without a receipt for the transaction, it is not being accepted. Suddenly that saving of 20% VAT has cost them additional income tax. In addition to undisclosed property income seven common pathways into a HMRC tax investigations are: 1) Tax return related matters – tax return filed late, tax paid late, or errors on tax return 2) Material inconsistencies and/or variations on comparative tax returns 3) Reported income and expenditure seemingly inconsistent for its business sector 4) Life-style and reported tax returns being inconsistent 5) The existence of offshore bank accounts 6) Taxpayer operating in a HMRC deemed high-risk sector, such as cash orientated 7) HMRC has received third party information about the taxpayer Taxpayers should not assume that a tax investigation means they have committed a tax offence. Similarly, it does not mean HMRC are right in their assertion or findings. Therefore, taxpayers should seek professional advice as soon as they are formally notified of a HMRC tax investigation.

Wednesday 28 September: Goose Green Coffee Morning Talk - Highlights from the Tate Galleries

11am-12.30pm. Do join us for this special talk by Marcus Dickey Horley, Curator of Access Projects at the Tate Gallery. Marcus will describe the history of the Tate Gallery, from its origins near East Dulwich to its spread right across the Nation. The talk will be accompanied by described images and also by the use of handling objects and tactile replicas, so this talk is particularly suitable for people who are partially sighted or who might enjoy being able to touch. All are welcome. Free event. Coffee Morning will open at 11 o'clock with the talk starting at 11:30. St John's East Dulwich, 62A East Dulwich Road, East Dulwich.

Wednesday 28 September: Cooking with Scissors

6.45pm-8pm. An opportunity for local business professionals to meet, make new contacts and gain new business. The last Wednesday of every month. Free Admission. To find out more or register please go to our website:

www.cookingwithscissors.co.uk

The Lordship Pub, 211 Lordship Lane, SE22 8HA

Thursday 29 September: Jeremy Bowen: The Making of the Modern Middle East

7:30pm - 8:30pm. Jeremy Bowen, the BBC’s Middle East Editor has been covering the region since 1989. He has also been reporting on the Russian invasion of Ukraine from the heart of the conflict. This is his account of the making of the modern Middle East. In this new book, in part based on his acclaimed podcast, Bowen takes us on a journey across the Middle East and through its history. He has reported from more than seventy countries, covering thirteen wars including those in Afghanistan, Lebanon, Chechnya, Somalia, the Middle East, Rwanda and former Yugoslavia. His previous books include Six Days, War Stories and The Arab Uprisings. A Village Books and Alleyn’s Schools Enterprises Event. Tickets: www.mct.alleyns.org.uk The MCT at Alleyn’s, Alleyn’s School, Townley Road, Dulwich, SE22 8S

Friday 30 September: Chris Wood, Joe Wilkes, Jim O’Mulloy

7:00pm - 11:00pm. We are delighted to be welcoming Chris Wood back to The Goose Is Out! In a world of soundbites and distractions Chris is a truth seeker. His writing is permeated with love and wry intelligence, uplifting and challenging as he celebrates the sheer one-thing-after-anotherness of life. Winner of 6 BBC Folk Awards, he was a key member of The Imagined Village along with Billy Bragg and Martin Carthy. A wise and soulful craftsman, his concerts are a cliche free zone. Joe Wilkes (replacing Rainy Day Woman) is a brilliant singer songwriter based in South London. Jim O’Mulloy is another local lad who sings and plays guitar very beautifully. Tickets: www.wegottickets.com/thegooseisout The Ivy House, 40 Stuart Road, Nunhead, SE15 3BE