Tax cheat check-up launched by HMRC on 22-Feb-2011

T ax cheats will face up to five years’ detailed scrutiny from the taxman. Letters will start to land on the doorsteps of 900 tax cheats, telling known evaders that they are now under increased levels of personal scrutiny as part of the HM Revenue & Customs (HMRC) new Managing Deliberate Defaulters (MDD) programme.

MDD will closely monitor the tax affairs of individuals and businesses who have deliberately evaded tax to ensure that they are complying with their tax obligations and have demonstrated a permanent change in their behaviour.

"“Managing Deliberate Defaulters will deter people from evading tax in the future and reassure honest taxpayers that tax evaders will be dealt with. This government has made it clear that we will not tolerate people who refuse to pay their fair share and HMRC will pursue those who bend or break the rules," said David Gauke, Exchequer Secretary to the Treasury.

"Tax cheat check-ups will involve continued and close scrutiny - it is a real deterrent. If you are thinking about breaking the rules just remember, you could end up with HMRC on your back for five years," said HMRC’s Steve Hickman.

"We have worked closely with the accountant community to develop this programme and their help has been invaluable in getting the detail right."

The level and term of monitoring will depend on the seriousness of the offence, but it is not envisaged that anyone will be released from the programme within two years. HMRC will continue to check that returns are filed on time and that any tax that is due is paid on time, but there will also be regular reviews of deliberate defaulters’ tax affairs to check that any errors or failings have been put right. There are a variety of ways HMRC can monitor a deliberate defaulter’s tax affairs. These include:

• Making announced or unannounced inspection visits to carry out pre-return checks of their books and records.
• Asking for certain records so that they can be checked.
• Requiring that additional information or documents are sent in with the person’s tax returns.
• Conducting in-depth compliance checks into all or any part of the person’s tax affairs.
• Observing and recording the person's business activities and cross-checking details in their accounts. For example, we may make test purchases or inspect the records of one or more of their suppliers or customers.

For our VAT customers we may:

• Require submission of quarterly or monthly VAT returns.
• Require the same accounting periods for VAT and Income Tax or Corporation Tax.
• We may withdraw the use of certain schemes (for example, cash accounting, annual accounting, flat-rate scheme, retail schemes) if we think it is necessary for the protection of the revenue.

Evaders who fail to keep their tax affairs in order will face increasingly intrusive interventions from HMRC and if deliberate evasion continues, HMRC may also start criminal proceedings.

Safeguards are also being put in place to ensure that deliberate defaulters do not escape scrutiny by simply starting up a new business under a different name or identity. In these instances HMRC may continue to monitor the new business.

More information about managing deliberate defaulters can be found at:
www.hmrc.gov.uk/about/tax-defaulters.htm

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