Self-assessment raises evasion risk
A survey of tax inspectors warns that taxpayers failing to providefull disclosure in their self-assessment returns will open themselves to aRevenue investigation.
Naive and simplistic standard accounts information (SAI) on self-assessment tax returns threatens to increase the risk of tax evasion, experts have said.
The warning comes as some district tax inspectors claim that taxpayers will also significantly increase their chances of an Inland Revenue investigation if they fail to disclose full accounts information with their returns.
Kingston Smith’s senior partner Michael Snyder condemned SAIs in a letter to former Chancellor Kenneth Clarke. Snyder, chairman of the London Society of Chartered Accountants Practitioner Board, wants the SAI eliminated and replaced by ‘commercial reality’.
He said: ‘When will the Revenue realise that business is run for the economic benefit of the community as a whole? Why should the taxpayer be forced to produce and pay for another set of accounts in the SAI format?’
Snyder said the only hope was for a change of heart by the new Labour government.
SAIs are designed to streamline return processing, allowing standardised electronic returns and computer-based risk assessment.
Richard Murphy, senior partner of London chartered accountants Murphy Deeks Nolan, has surveyed tax inspectors about the new regime. He told Accountancy Age that their concerns are real.
‘If a taxpayer sends all the information in with reasonable explanation, the risk of a revenue audit will fall hugely,’ Murphy said.
‘Local inspectors I have spoken to expect to subject 30% of all returns to a reasonable degree of scrutiny. Taxpayers submitting decent information will immediately fall outside the inspection net.’
Murphy, who believes most accountants will file traditional accounts, added: ‘This means that electronic lodgement is dead in the water. You cannot submit sufficiently detailed returns by it.’
Treasury private secretary Dermot Finch, in a reply to Snyder, said no representative bodies have suggested SAI would fail to meet their needs.
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The Revenue has denied accountants’ claims that it intends to target sectors such as construction workers and taxi drivers for self-assessment random audits. The system will be totally random, it insisted.