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 amount collected has fallen from £301.2m in 2014-15, indicating that the government’s strategy and legislative changes have been successful in preventing SDLT avoidance opportunities
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Taxpayers waited an average of 303 days for HMRC enquiries to close during tax year 2015-16