The taxman cannot collect the money it is owed under existing legislation, yet HMRC continues to demand and receive even more powers. At the same time, it nonsensically focuses its energies on chasing tiny amounts from soft targets, such as contractors and small businesses.
The Public Accounts Committee has published its report into debt owed to central government. Of the staggering £22bn debtors owe the government, £15.1bn is owed to HMRC. In fact, as of March 2013, 61% of HMRC’s debt was 180 days overdue.
That means HMRC has been unable to collect over £9bn for over two years. These debts would have arisen as a result of HMRC’s existing powers and tax legislation in force for some years. So, clearly, the taxman is not doing a very good job of collecting money that is definitely owed to the exchequer.
And yet, in that time, HMRC has demanded and received even further powers. The most high profile of these include the raft of anti-avoidance measures, such as accelerated payments and follow-on notices, plus the wider powers to extract cash directly from taxpayers’ bank accounts.
Behind the scenes, HMRC has also been tinkering with pensions and property tax laws, among others, to further increase the size of the UK’s already record-breaking tax code.
In its Measuring tax gaps 2013 edition, HMRC’s 2011-2012 estimate of the tax ‘lost’ as a result of avoidance activity is £4bn. That’s an HMRC estimate, based on the taxman’s own models, of the additional tax that would be generated if avoidance activity was tackled more effectively. Let’s emphasise the phrase ‘HMRC estimate’ – this is not money owed as a result of completed tax returns on profits or earnings, or capital gains. It is an estimate, not money in the bank.
HMRC also estimates that the new anti-avoidance rules will generate £340m in 2014-2015 and £1.23bn in 2015-16. That estimate of notional money represents a fraction of the amount of money that is actually owed to the taxman.
So, rather than provide even further complex rules and regulations to enforce, why not let the taxman get on with properly policing the rules it already has? The sums suggest that this would generate a lot more cash for the Exchequer and certainly a lot more value for the taxpayer.
And if this change in strategy results in a shift of focus away from targeting contractors with IR35 that generates virtually no yield in comparison, then so much the better for contractors and – more importantly – all taxpayers.