HMRC posts record tax profit

Wednesday 28 May 2014

HM Revenue and Customs (HMRC) has collected record sums in additional tax revenue over the last year as a result of cracking down on avoiders, which for businesses it's a reminder that it is now more important to remain compliant and transparent.

Figures published yesterday (May 27th) showed £23.9 billion in tax profit was recorded during the last 12 months as a result of increased activity to ensure compliance on behalf of HMRC.

The amount of tax secured through investigations and collected from those that pay on time grew by £3.2 billion year-on-year and a massive £9 billion on three years ago.

Currently the amount raised by HMRC is £1 billion above the target set down in the 2013 Autumn Statement.

David Gauke, exchequer to the Treasury, explained that the government set the tax body an ambitious target in order to increase its yield. This has certainly paid off, as HMRC has exceeded its initial goal.

While cracking down on tax avoidance appears to be integral part of HMRC strategy, contractors, limited companies and sole traders may be somewhat concerned by the new figures.

Matt Fryer, business development manager at Brookson, explained: "The statistics make interesting reading but for the self-employed the figures are a salient reminder that there is now no room for error when it comes to filling in their tax returns. We know that HMRC is not only heavily clamping down on tax avoidance schemes, but small mistakes that may have been overlooked in years gone by could also lead to investigations, so people really need to be on their game with their tax.

"Contractor accountants are now more important than ever to ensure the self-employed are compliant. There's a lot of pressure and responsibility when you choose to strike out on your own and it's crucial to have the right guidance there to make the transition as smooth as possible."

Indeed, record keeping, expense tracking and financial monitoring is key to ensuring success once a person becomes self-employed. With HMRC becoming ever more vigilant, there is no room for error and the proper practices must be adopted throughout the year by freelancers and businesses - not just around tax return deadlines.

In a bid to improve compliance, HMRC has published 'HMRC Fast Facts: Record Compliance Revenues for the UK'.

The document reviews the tax body's activities and the actions already taken to tackle avoidance, giving self-employed individuals a clearer picture of what's going on.

Steps taken by HMRC include launching taskforces, publishing details of deliberate and serious defaulters and challenging tax avoidance through the courts.

People can also find out about future steps that will be taken, including addressing high-risk promoters and tackling offshore tax avoidance.

With figures from the Daily Telegraph showing that over the year HMRC has doubled the number of investigations it conducts into self-assessment taxpayers, this insight will be crucial.

In fact, over the last 12 months the tax affairs of 237,215 people were investigated. This is up from 119,000 in 2011-12, indicating that the net is tightening around tax avoiders.

By Victoria McDonnell

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