George Osborne's tax claim dismissed

Friday 29 August 2014

The claim by chancellor George Osborne that twice as much tax since the last election is being collected by HM Revenue and Customs (HMRC) than before has been ruled out.

Mr Osborne made the claim during the Budget in March this year, when he applauded HMRC for its fight against tax avoidance.

However, investigations by The Independent and Private Eye found that the figures that Mr Osborne used did not refer to physical money already banked by the State but rather that this was an outline of a target for the amount of tax that this Parliament was to collect. What's more, this was based on a completely different measurement from the last five-year election cycle.

This case was then sent on to head of the UK Statistics Authority Sir Andrew Dilnot, who agreed that it was inappropriate to directly compare the different figures.

It was found that the problem stems from when Mr Osborne became chancellor in 2010, where the year's Spending Review included projected figures from HMRC that was used to tot up balance sheets. This is a move that has continued ever since.

The issue is that it is only a prediction from HMRC of additional tax sums that it expects to collect in the future. It also includes liabilities of people that are expected to be caught in the future and with the thought that they will become and stay compliant thereafter.

In the four separate components to the Spending Review, they make up the HMRC's compliance yield, which totalled at £23.9 billion for the year 2013 to 2014. Yet less than half of this total is equal to the actual amount of money that has been collected by the department.

For this reason, HMRC was able to give Mr Osborne a figure of £100 billion in terms of how much it has actually yielded compared to only £52 billion in the years prior to the last election.

It has said that it no longer believes it is appropriate to compare compliance yields in the way that they have been measured during this government as figures before that do not represent an accurate like-for-like comparison.

During the Budget, Mr Osborne announced measures for tackling tax avoidance in the near future. Anyone, including limited company contractors, who has had an enquiry notice or notice of assessment from HMRC or who has used a tax avoidance scheme that is countered by the General Anti-Abuse Rule will have to pay the disputed amount up front.

They will also have no right of appeal and, at the time of the Budget, it was predicted that 16,000 contractors would be affected. Each of these had a mean gross income of £262,000 and 85 per cent had multiple sources of income, which includes their self employment ventures.

It was also announced that people who disguise themselves under false self employment would be cracked down on and legislation was strengthened to stop employment intermediaries offshore avoiding income tax and National Insurance Contributions.

By Victoria McDonnell

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