Taxman’s six-year rule ‘ditched to hike yields’

The taxman has been accused of increasing the time limit for pursuing
possible underpayments from up to six years to 20 in a move to increase its
recovery yield.

Abbey Tax Protection claims HMRC is widening the number of enquiry cases
where it claims returns have been ‘negligently’ completed.

‘In the past, if there was a minor problem they would look at six years and
close it down,’ said Liz Grace, operations director at Abbey Tax Protection.

‘Now, they are going back several years further and charging a penalty plus
interest, which can end up as quite a sizeable income. It’s a tactic they are
adopting to gain more from their enquiry work.’

The company said that over the last five years it has noticed the average
length of the enquiry cases it has dealt with extending from 13 to 19 months.

‘There used to be an unwritten rule that you never went back further than six
years unless it was for heinous stuff,’ said David Marples, head of Abbey Tax
Protection’s enquiry consultancy team

He points to HMRC’s annual report which shows that while the number of
enquiry cases has dropped by 15% yields have risen by 27%.

Marples quotes cases such as misunderstandings between businesses and their
accountants over tax deductible motoring allowances being looked at as far back
as 20 years ago.

He also cites the case of a beautician who had only just launched her
business being charged a penalty for negligence.

She had received poor tax advice telling her that the renovations she had
carried out to the premises were tax deductible. She was charged for 30% of the
interest due.
HMRC spokesman Jan Marszewski said it was ‘nonsense’ that increased targets
would have any impact on decisions about how far back to conduct investigations.

‘We will go back more than six years if we discover that income tax, capital
gains tax or corporation tax has not been assessed or has been underassessed a
nd there is
sufficient evidence that the taxpayer has been fraudulent or negligent,’
Marszewski said.

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