A total of £16bn was lost through tax fraud last year, according to estimates released by Pinsent Masons.
The law firm said that despite HMRC collecting an addition £5bn in revenue through its Fraud Investigation Service, the £16bn lost represents almost half of HMRC’s tax gap, which stands at £34bn.
Out of the £5bn collected over the past 12 months, £2.2bn came from HMRC criminal investigations, and £2.7bn from civil investigations. The Fraud Investigation Service responsible for the collection was set up in July 2015 and includes specialist tax and criminal justice experts to deal with serious investigations.
Civil investigations are conducted using the Contractual Disclosure Facility, designed to encourage taxpayer cooperation. Under the civil procedures and CDF, a taxpayer enters into a contract with HMRC and avoids a criminal investigation, so long as they fulfil their obligations under the contract and fully disclose all details to the authorities.
Paul Noble, tax director at Pinsent Masons, said: “The new Fraud Investigation Service has been successful in collecting additional revenue but tax fraud remains very damaging to the Treasury.
“HMRC’s internal restructuring and the creation of the FIS demonstrates the government’s determination to stamp out tax fraud, especially in the aftermath of the Panama Papers scandal.”
“It’s essential that if you are offered the CDF, or have a disclosure to make, that you seek specialist advice as HMRC has adopted an increasingly aggressive stance to those who don’t cooperate. With the right advice, someone with an issue to disclose can do so without the risk of criminal prosecution. Proactive disclosure of tax irregularities has its advantages,” he added.
The ATT had previously expressed concern that the legislation was overly complex and created unnecessary complications within the practical working of the new allowances
Introduced in 2013 to encourage R&D investment, the scheme allows UK businesses to pay only 10% corporation tax on profits derived from any UK or certain EU patents
APNs are issued to individuals and businesses who are suspected of having engaged in tax avoidance, and require full payment of the disputed tax within 90 days
Yet, KPMG’s annual survey shows that the UK is still an attractive place to do business, despite falling in rankings in tax competitiveness and FDI appeal