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Insolvency tax dodgers face five-year scrutiny by HMRC

TAX EVADERS who become insolvent to dodge tax obligations face up to five years’ scrutiny from HM Revenue & Customs.

The taxman will monitor the tax affairs of individuals and businesses who have deliberately evaded tax for up to five years under the Managing Serious Defaulters scheme in order to ensure they “comply with their tax obligations and permanently change their behaviour”.

It replaces the previous Managing Deliberate Defaulters scheme, which has been running since 2011 with the aim of returning evaders back to the straight and narrow through close monitoring, with HMRC reporting that early indications suggest that those monitored are indeed disclosing previously undeclared income and amending previous tax returns.

More than 3,000 evaders had been placed in the existing scheme since it was launched in February 2011, with those currently monitored under it to be moved over to the new one when it begins.

The incoming scheme will include evaders who have received a civil evasion penalty for dishonestly evading VAT; or are required to give a security deposit for VAT, environmental taxes, PAYE or national insurance; or become deliberately insolvent as a way of dodging their business taxation obligations.

Exchequer secretary to the Treasury David Gauke said: “Increasingly, evaders are using contrived insolvency to evade tax, either through liquidation of a business or bankruptcy of an individual. It is only fair that someone who has deliberately tried to evade tax should face extra scrutiny from HMRC.

“This measure, along with those announced in the Budget, demonstrates that we will crack down on people who don’t pay what they owe.”

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