HMRC to watch tax cheats for 5 years

Posted on 14 Feb 2013
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HMRC has vowed to keep a beady eye on tax cheats who become insolvent to dodge their companies’ tax obligations for up to five years, reports Chartered Accountants Northampton Harris & Co.

Under its Managing Serious Defaulters (MSD) scheme, HMRC says that from April 1 2013, it will closely monitor the tax affairs of individuals and businesses that have deliberately evaded tax to ‘ensure that they comply with their tax obligations and permanently change their behaviour’.

The MSD programme replaces and expands the Managing Deliberate Defaulters (MDD) scheme, launched in February 2011, which already monitors some 3,000 evaders.

HMRC says early feedback suggests that those monitored are changing their behaviour, leading them to disclose concealed income and amend previous tax returns.

David Gauke, Exchequer Secretary to the Treasury, said: ‘Increasingly, evaders are using contrived insolvency to evade tax, either through liquidation of a business or bankruptcy of an individual. It is only fair that someone who has deliberately tried to evade tax should face extra scrutiny from HMRC.

‘This measure, along with those announced in the Budget, demonstrates that we will crack down on people who don’t pay what they owe.’

MSD aims to target evaders who have received a civil evasion penalty for dishonestly evading VAT, those required to give a security deposit for VAT, environmental taxes, PAYE or NICs, and anyone that deliberately becomes insolvent to avoid their business tax obligations.

Under MSD, HMRC officials can conduct unannounced visits and carry out in-depth compliance checks, while defaulters could face criminal proceedings.

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