Never again, promises Revenue as experts call for greater regulation

Renegade taxman Michael Allcock’s part in the Inland Revenue’s most embarrassing corruption scandal ended last week as he began a five-year sentence for accepting bribes on a ‘breathtaking’ scale.

But calls for the Revenue to display publicly that it has cleaned up its act continued in the wake of the four-month Old Bailey trial. The department issued damage-limitation statements soon after Allcock’s guilt was confirmed by a majority jury verdict.

Never again, pledged the Revenue, would staff be allowed to accept foreign travel at the expense of a taxpayer under investigation, and steps had been taken to discipline three members of staff involved, to a greater or lesser extent, in the affair.

The gift of a diary or calendar is acceptable, says the Revenue, but anything more is forbidden. Allcock’s acceptance of at least u150,000, lavish holidays and the services of a prostitute demonstrate his gross abuse of power.

Levy Gee tax investigation specialist John Gwyer warned Revenue Board chairman Sir Anthony Battishill about Allcock’s unorthodox methods 18 months before he was suspended.

His methods included developing an unprecedented informal relationship with Stock Exchange surveillance department insiders to glean information about offshore companies suspected of insider dealing. But the letter, sent while Gwyer was Coopers & Lybrand adviser to Polly Peck tycoon Asil Nadir, went unheeded.

Gwyer called for greater regulation of the Revenue, despite its promise of reform. ‘Can we trust the Revenue to regulate itself adequately?’ Gwyer asked.

‘There are not enough checks and balances. As the wider self-assessment regime is established, the Revenue will have greater powers of investigation and, in particular, will no longer have to give a reason for mounting an investigation.’

He added: ‘The Revenue has demonstrated that it cannot be trusted with the proper administration of a complaint process. Surely the Government should drop the requirement that complaints must first be made to the department before the adjudicator is approached.’

However, the Revenue adjudicator’s office, which would be a natural home for an external regulator, argued that proper regulation already exists.

Head of office at the adjudicator Mike Savage said: ‘We’re conscious that the Revenue has good guidance as to how it should conduct investigations, but we are not involved in what arrangements there should be for a Revenue official visiting taxpayers.

‘It is right to investigate those people’s affairs properly, efficiently and in whatever way is appropriate for them. We would only look at a complaint that the Revenue had used oppressive measures to pursue an investigation, otherwise its internal audit procedure should discover financial improprieties.’

It was a view backed by the Revenue. A spokesman said: ‘We are very accountable already and have the Public Accounts Committee in Parliament to answer to at the highest level.

‘We have internal audit carrying out reviews of our security and control processes surrounding investigations and the Special Compliance Office (Allcock’s former unit) now has a highly developed risk assessment plan.

‘Every investigation is looked at by different people. A single person could not run a case according to his own rule book.’

Pressure to produce results has been compounded by the Chancellor’s commitment to increase tax yield through his spend-to-save initiative which was announced in November’s Budget. Over the next three years, the Revenue alone must generate an extra #2.6bn from its tax investigations – it has been promised 2,000 redeployed staff to help it do so.

The Revenue is confident that its inspectors and other staff will reap the Chancellor’s forecast without needing to bend the rules. Its spokesman added: ‘We don’t accept there is more pressure now to produce results.

‘Our inspectors are assessed annually and we do not have financial targets for them to meet – we look at their overall standard of work.

‘The Government’s forecasts are based on the Revenue conducting investigations as they are meant to be carried out, not by any kind of pressuring or inappropriate behaviour.’

But the Revenue is changing and its powers are increasing. The advent of self-assessment, complete with the Revenue’s new powers to conduct 10,000 random audits of taxpayers each year, provides an opportunity for the department’s investigators to delve into the nation’s tax affairs as never before.

It will not be just the wealthy or high-profile taxpayers that will be investigation targets – Allcock won settlements from Reggie Kray, Mick Jagger, Asil Nadir and George Walker among others. Ordinary taxpayers too are threatened with close Revenue scrutiny.

Last year the Revenue prosecuted eight people following SCO investigations.

The number is set to rise dramatically after dedicated units were established within the department.

Grant Thornton’s head of tax investigations, Charlie Hall, claimed the Revenue is petrified the new regime will create a new breed of tax cheats.

Its response will be to step up the number of prosecutions as a scare tactic.

‘Allcock’s conviction should be seen as a timely reminder of just how serious investigations by the Revenue can become,’ warned Hall. ‘The Revenue doesn’t just prosecute its own – it is running scared and planning a major attack.’