CinnabarRed's tax thread

It won't be 'average' HMRC employees doing the investigations though. It will be the brightest and the best. With assistance, where appropriate from the police, CPS, criminal lawyers, forensic accountants and the like.

I hate evaders. I hope they get the book thrown at them.

Reasonably successful. For two reasons. First, it's getting easier and easier for HMRC to get information from overseas tax authorities and/or institutions such as banks, so it will take relatively little manpower to catch evaders. Secondly, there may be relatively few affluent evaders but each one will owe a staggering amount of tax (and interest and penalties) when caught. So 1 caught affluent evader will generate a far greater yield than 1 caught small time evader, and probably for less effort. Now the floodgates of information from overseas are open, the affluent are the low hanging fruit.

Have you ever heard the story of how Lester Piggott was caught for tax evasion? The Revenue started investigating his affairs, realised that he wasn't complying, but couldn't prove that it was deliberate (he was playing the old "I'm just a simple jockey, sir, I don't understand numbers" card for all he was worth). So the Revenue cut a reasonable deal with him and he paid his tax bill with a cheque from an offshore account he hadn't bothered to mention before! Either staggeringly arrogant or staggeringly stupid. That's why they threw the book at him: if he'd come clean I doubt he would have got prison time.

Hi Scaryteacher (are you, BTW?), as I say, I'm not great on expat taxation. I'll do some digging to find out exactly what's been proposed.

Am I right in understanding that you and DH are UK expats currently living and working in Belgium?

Hi Scaryteacher (are you, BTW?), as I say, I'm not great on expat taxation. I'll do some digging to find out exactly what's been proposed.

Meditrina: the Channel Islands and the Isle of Man are in an odd position when it comes to taxation. They're not in the EU for indirect tax purposes (i.e. VAT and customs duties); they are within the scope of the EU Code of Conduct for Taxation, which is the enforcement mechanism that I think you're referring to, presumably in the context of their 0/10 regimes.

As an aside, the EU puts pressure for tax compliance on a number of non-EU jurisdictions, often most successfully. Hence the proposal that Swiss banks will levy withholding tax on interest paid to individuals outside Switzerland, and Lichtenstein's new transparency.

ScaryTeacher: this isn't something I know anything about. Let me look into it and get back to you. My immediate reaction is that the UK-Belgian double tax treaty would give one nation or the other primary taxation rights, so I'd be surprised if anyone suffered tax in both countries in practice.

Anytime. I keep an eye on this thread so post if you have any more questions.

In my opinion and experience, the best at HMRC are top flight. Smart, pragmatic, commercial, intelligent, creative. No different, in fact from the better private sector tax experts. The issue is that the average HMRC employee is, frankly, not on a par with the average private sector tax person.

Now, that doesn't matter as much as you might think, because the vast majority of taxpayers are small businesses who aren't interested, and don't have the resources, to get involved in tax planning. So the mismatch is smaller than it first appears.

It was an issue when average Inspectors came up against the cream of the private sector. However, HMRC and the Treasury have been smart on how they counter this.

First, they introduced the disclosure rules. They say that if someone in the private sector comes up with a cute tax planning scheme then by law they have to disclose details of how it works to HMRC within a very short time frame - think days rather than weeks. That means that HMRC can very quickly act to counter avoidance by changing the tax legislation.

Secondly, they have implemented a new policy of trust and transparency between HMRC and big business/high net worth individuals. Each taxpayer in the programme has been assigned a risk rating by HMRC, and believe me it's a rigerous process. A low risk rating means HMRC have reviewed your affairs, accept that you're compliant and will apply a light touch in dealing with you. A high risk rating means HMRC will pay you far more attention, and not in a good way. The carrot for tax payers is that where there are areas of genuine uncertainty over how the law should be applied (which crops up all the time, especially with complex companies which are generally defined as the largest 10,000) then HMRC will help them come to a fair and commercial agreement.

Thirdly, HMRC have spent a lot of time and effort identifying risk triggers across all taxpayers (not just big business/HNWI). They're focussing their efforts far better and getting results to prove it.

HMRC, like most of the 103 departments, are facing spending cuts of 25%. However, unlike the rest they're getting 10% back specifically to tackle avoidance and evasion. So their actual cut is only 15%. Clearly it will effect headcount.

HMRC thinks that it can cope with most of this through efficiency savings (e.g. increased automation, take effort away from the compliant majority and focus it on evaders/avoiders/those who want to be compliant but need more help). I think that there are undoubtedly efficiency savings to be made, but I'm sceptical that it there's enough slack in the system than it will absorb all of the pain.

No problem spidookly. I'm just opinionated!

I went to a fascinating meeting with a very senior offical from HMRC today. It was a restricted access meeting, so I can't say too much about it. But a few things that caught my interest were:

• HMRC have done a lot of work to calculate the tax gap (the difference between the theoretical tax revenue that would be collected if everyone were fully compliant and actual tax revenue). Broad brush, their estimate is in the same ball park as figures estimated by reputable economists. I'm not going to give you the Revenue's precise figure, because it would be a shabby thing to do, but most economists put it at between £35bn and £50bn per annum. Certainly not £120bn +, which is the figure the more hysterical like to bandy around.

• Of the total tax gap about a quarter is lost through avoidance (e.g. legal but unpalable tax loopholes); way more than half through deliberate (illegal) evasion; and the rest through negligence and organised criminal activity.

• The vast majority of evasion is by small businesses and self-employed sole traders. Less than a tenth is from megaweathy people with offshore undeclared bank accounts.

• research shows that once a small business is established, it decides very quickly (within the first six months of trading) whether it's going to be honest or fraudulent with the tax man. Once a decision has been made to be fraudulent, very few go back to compliance.

• Happily, three quarters of tax payers genuinely want to be tax complaint and over half actually are. The rest need more help from HMRC to get their taxes right, especially around one-off events such as starting a business.

Overall, it's a remarkably positive Budget unless you're an oil company or a bank.

I do think it will stimulate growth, especially for small businesses.

Will the UK be the best place in Europe for business? Hard to say, but I think the announcements will certainly make it more attractive than it is at present.

Anyone want to talk about the Budget?

Himalaya - I head up small team of people that help governments to set their tax policies (Disclaimer: we're all employed by one of the Big 4 professional services firms).

I used to specialise in how tax policies effect taxpayer behaviour; but at the moment I'm entirely sold out on minimising tax avoidance and ensuring compliance with the "international norm".