Financial Matters
With David Frederick FCCA | Marcus Bishop Associates | marcus-bishop.com
HMRC & Taxpayers’ Pantomime Listening to some taxpayers conjures up a sense of a taxpayer’s pantomime being played out in everyday life. Audience participation and some key phrases are at the heart of all pantomimes. Three key phrases common to all pantomime performances are: “Look behind you!”; “Oh, yes it is!” and “Oh, no it isn’t!” These phrases are reminiscent of some taxpayers’ engagement or lack of engagement with their tax affairs and HMRC. Moreover, there is an over indulgent phrase not yet weaved into our pantomimes and that is, “how will they (HMRC) find out?” A simple answer may be, very easily. However, this may not suffice in the world of the taxpayer’s pantomime. The following extract from one taxpayers pantomime may help. Several years ago a taxpayer was outraged because they thought their local authority had reported them to HMRC. The fact was, the employed taxpayer with two residential rental properties had not subscribed to the payment of income tax for their rental income. It just so happened that the local authority also had a landlord’s registration scheme for private landlords. Not surprisingly, the taxpayer had not joined the scheme. However, the taxpayer’s world changed on the day they received one of HMRC’s fishing letters enquiring about their two residential properties. The taxpayer had ignored the “look behind you” pantomime phrase. This was compounded with the fact that the taxpayer had chosen to believe, “oh, no it isn’t” HMRC observing them from afar. HMRC’s letter came as a nasty surprise. Although it should have been expected! The letter was not as painful as the subsequent thousands of pounds income tax, penalties and interest that the taxpayer had to pay HMRC. The phrase, “Oh, yes they did!” comes to mind. The unsuspecting taxpayer was oblivious to the fact that their letting activity was being reported annually to HMRC by their friendly letting agent. A 22 | SE22 - February 2022
classic example of neglecting, “look behind you!” Although such behaviour is not uncommon it still exists. Taxpayers can simply avoid this pantomime by engaging with HMRC and just being aware of the prevailing environment. HMRC has multiple sources of capturing data on taxpayers and our income activities. Hence taxpayers should familiarise themselves with the language of pantomime if they wish to attempt and beat HMRC. It may be much easier and more comforting for taxpayers to engage in tax compliance rather than pursue the path of tax evasion. Nevertheless, there is always the minority who like a challenge. In truth, for every successful taxpayer, willing to share their story of how they beat HMRC, there are 99 others whose story does not have a happy ending. Furthermore, the sole victorious taxpayer, often gets ensnared in the long run. It is no big secret that HMRC has access to multiple data sources such as: • Social media platforms. One of the biggest sources in recent years; • HM Land Registry with its ever ready register of the legal owners of property; • Open data exchange between tax authorities via The Common Reporting Standards; • Banks and financial institutions filing of Suspicious Activity Reports (SARs); • DVLA provides a ready access to identify vehicle owners and access to much more about the owner; and • Mortgage applications submitted to mortgage providers by taxpayers. The list is forever growing and taxpayers should not remain blinkered by the false reality of believing HMRC will not find out. “Look behind you”. Simon York, Director, Fraud Investigation Service, HMRC, said: “HMRC deploys cutting-edge technology to investigate unexplained wealth and uncover hidden assets.” The continual expansion of the digital world plus the Making Tax Digital future of HMRC, may serve to reduce the scale of tax evasion tomorrow. Only time will tell whether this will bring down the curtain on the taxpayers’ pantomime.
