Naming and shaming of tax dodgers not far away

TAX DODGERS could soon be named and shamed in local and regional media, thanks to an initiative administered by HM Revenue & Customs.

While the scheme to publish details of deliberate defaulters has not been utilised since it was brought in on 3 March 2010, names of those not paying their share – individuals, companies, partnerships and trusts – can be expected to appear in the media next year.

In order for a tax dodger to be named and shamed, a lengthy list of criteria must be satisfied. HMRC may release names if, after undergoing a compliance check, they are penalised for deliberate inaccuracies, failures and/or wrongdoings amounting to more than £25,000 since April 2010.

The scheme not only applies to income tax and corporation tax, but also to VAT and national insurance. Tax credits and customs duties are not covered, though.

Before a name can be published, the compliance check must be carried out, a penalty levied, statutory safeguards accounted for – including the taxpayer’s right to exhaust all appeal routes – and time allowed for representations to be made to HMRC as to why the name may not be published.

The initiative is designed to encourage voluntary disclosure, make clear that evasion and non-compliance is wrong, and deter deliberate non-compliance.

In making a voluntary disclosure from the outset, publication can be avoided with reduced penalties imposed.

Smith & Williamson national head of tax Richard Mannion said: “It is still early days for any such inaccuracy to have been uncovered in relation to an individual’s personal tax affairs, but the chances of someone being caught out for a deliberate under-declaration of VAT for a period after April 2010 must be increasing rapidly.

“Taxpayers should not be lulled into a false sense of security because reports have yet to be seen. Naming and shaming is here to stay and we will undoubtedly be seeing reports in the local paper or even the nationals in the not too distant future.”

The question, then, for accountants whose clients may fall foul of the scheme is how to avert such a fate.

There are two possible ways. The first is a full and complete disclosure of any deliberate defaults before the start of an investigation, so that relevant penalties will not be found to have been discovered as a consequence of an investigation.

The second is by making a full and complete disclosure at the start of an HMRC investigation and co-operating fully from then on. Anyone doing this “should earn the full penalty reduction for disclosure”, says Mannion.

Ordinarily, HMRC cannot publish details relating to taxpayers, but the legislation permits disclosure in instances of tax dodging.

The legislation allows HMRC to publish the details of deliberate defaulters for no more than 12 months after they are found guilty.

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