HMRC Is Shite

HMRC Is Shite
Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.

Friday, 22 August 2014

HMRC's Named and Shamed List

HMRC, to much fanfare, has published another one of its named and shamed lists (this being a list of tax evaders).

HMRC publishes details of deliberate tax defaulters - people who have received penalties either for either:
  • deliberate errors in their tax returns
  • deliberately failing to comply with their tax obligations
The law that allows this is Section 94 Finance Act 2009.
HMRC may publish information about a deliberate tax defaulter where:
  • HMRC has carried out an investigation and the person has been charged one or more penalties for deliberate defaults
  • those penalties involve tax of more than £25,000
However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults.

HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based.

HMRC publish this information once these penalties are final. A penalty becomes final on either:
  • the day after the end of the appeal period if the person does not make an appeal
  • the date when an appeal is finally determined
  • the date when a contract settlement is made
The law requires that HMRC do not publish any information about the person for more than 12 months from the date HMRC first publish it.

The current list totals around £30M (not exactly an humongous amount), of which £29.7M is accounted for by one company.

It seems an awful lot of work and fanfare for an amount that, in terms of the total tax take of HMRC, is so trivial.

Tax does have to be taxing.

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  1. "It seems an awful lot of work and fanfare for an amount that, in terms of the total tax take of HMRC, is so trivial."

    But posting a pdf on the internet and using a few press releases is also trivial in terms of HMRC's resources.

    More importantly, it's about deterrent value. You could argue that it's not worth investigating evasion below a certain threshold (which in practice would mean barely investigating it at all, because the biggest businesses don't do it, for various reasons I can expand upon if and when the flames appear) but then everyone would be at it and the tax loss would be much, much greater than the loss directly resulting from not doing the investigations.

    (For completeness I should say I'm still ambivalent about the civil liberties aspects of this, but its narrow economic justification stacks up.)

    Stew G

  2. More questions...

    When is a deliberate default of almost £30m revenue likely to be treated as evasion under criminal criteria? Must have the same brief as a certain F1 personality...

    How much of the various amounts of revenue and penalties are in the Chancellor's hands?

    What's the difference twixt deliberate default and evasion, when deliberate by definition includes a careful and considered act undertaken with full consciousness of the nature and effects, thought out in advance, planned, studied and intentional?

    Where are all the mobile phone deliberate defaulters, oops, forgot, Tax Havens, sorry!

    Have the revenue figures been included in revenue protected figures?

    1. 1. Criminal prosecution requires a higher standard of proof (beyond reasonable doubt). You can get done through the civil tribunal/court system and still have a penalty imposed based on balance of probabilities. You can also pay a penalty as part of an out-of-court settlement, in which case the mis-declaration is never actually proven; rather you've effectively said "it's a fair cop, gov" and cooperated in exchange for probably paying a lower penalty. When deciding whether to criminally prosecute someone (rather than accept a settlement or go down the civil action route), HMRC must weigh up: the chances of proving evasion to a criminal standard based on the evidence available; the cost of doing so and resources available; the recovery available through the other routes; deterrent effect of prosecution. Apparently, in this case, the balance of these factors led them to consider that prosecution wasn't the best option.

      (As an aside, this name and shame policy changes the balance, because the extent to which the deterrent impact of prosecution exceeds that of other outcomes, in theory, reduces.)

      2. Not quite sure I understand the question, but I presume it's about whether this is actual cash or revenue protected. Given that these relate to past periods and there are penalties, the tax(non)payers must be due to pay actual cash. There's a possibility that some of them are refusing to pay what's been assessed, in which case they'd just be subject to the usual collection of debt procedures (and it's conceivable that that one or more could be bankrupted and so not eventually pay) but, if the question is supposed to suggest that HMRC is claiming credit for getting money in here where an actual present liability to pay has not been established, I think it highly, highly unlikely.

      3. I suspect that "deliberate default" is the term used and defined in the legislation that gives HMRC the power to publish these details. "Evasion" isn't, to my knowledge, defined in statute. If you're criminally prosecuted for evasion, the charge will, I think be a common-law (i.e. not written in an actual statute, but established through 100s of years of case law) offence of something like cheating the public finances (sorry, but I don't have time to research all the details of this, including the jargon). If you're taken through the civil tribunals/courts, they won't make a formal finding of the type of behavior; they'll just say your return was wrong and you owe X - though they may refer to "evasion" in passing. In other words, my understanding is that "deliberate default" is a technical term whereas "evasion" is more of an informal but generally understood term. In practice, however, the meanings of the two will very much overlap.

      4. If you're referring to large corporate groups restructuring to ensure that profits sit outside the UK, that's rather beyond the scope of what I can sensibly go into here. Remember, though, that this is about naming and shaming. Certain groups have had their names very publicly dragged through the mud in the media regardless of whether they've made a deliberate default. I'd actually argue that's often a good thing, because it's in the public interest for the means by which some of them have allegedly been able to reduce their tax liabilities without defaulting, needing to default on their legal obligations to be publicised. Given that existing exposure, though, I struggle to see why they need to be in a list like this.

      5. For the reasons given in answer 2, I doubt it. There may be additional amounts included in Revenue Protected in respect of these people for future years, as estimates of tax they would have been expected to evade in future years if they hadn't been caught.

      Stew G

    2. Will attempt to be succinct,
      1. It is far easier to prove a case to civil standard rather than criminal, where criminal conduct may well have occurred but the powers that be decide it is easier to take the civil route combined with "full disclosure" and
      assistance in establishing the extent of the fraud then obviously £30m
      "civil" isn't criminal. Bet NCA might view this amount of evasion in a
      different light?
      2. Simple question, how much of the tax evaded and penalties issued has actually hit the government coffers?! Could not give a flying fig about peripheral issues, what's in the bank?
      3. Took me less than a minute to trace various references to offences involving evasion, albeit, fraudulent, which were nowt to do with common law. So the statutes obviously exist otherwise there would be no charges of fraudulent evasion.
      4. This was tongue in cheek to a certain extent, but somehow I don't believe for one moment that mobile phone related evasion, criminal or civil, has evaporated.
      5. Jury still out on this, although believe the PAC/NAO has a definitive view.

      There We Are Then!

    3. if the tax has been legitimately declared but not paid for any reason then it has not been 'evaded' as far as the law is concerned and no fraud has taken place. One might argue that individuals owners of business or the directors of companies that continued to operate when they knew thet could not meet their liabilities were trading 'recklessly' which is a potential criminal offence but the latter is hard to prove. Small enterprises with poor cash flow control are quite easily blown a way by minor economic misfortunes such as customers failing to pay their bills Given that the UK bankruptcy laws already exist for these circumstances criminalising people for failing to pay tax after business failure seems a step too far. It is also a moot point why these individuals and companies have been so publicly vilified by the state while the entire banking industry which traded recklessly for years was bailed out in its entirety by the taxpayer. Not one banking executive yhas gone to jail for their behaviour

    4. 1. I don't particularly disagree with what you say here, but I'd add that, no matter how dim a view the NCA might take, that doesn't mean they'd have the evidence to secure a prosecution. I'd probably accept that the existence of civil pursuit options (which don't generally exist for other forms of crime) might lead HMRC to be less aggressive in pursuing prosecution than they might otherwise be, but it's highly debatable whether it would be on the public interest for it to adopt a more aggressive (and therefore risky and expensive) policy. I'd speculate that, if the NCA were handed both responsibility for tackling evasion and the civil options, it might initially be quite a bit more bullish than HMRC, but that this would erode over time as reality intruded.

      2. I don't know the answer, but there's a simple solution: do a Freedom of Information request. (It would need to be carefully worded; I'd be happy to give a suggestion as to how to structure it if you're really interested in finding an answer.) As this is about deterrence through naming and shaming, the key question is actually whether it is established that these people owe the money they've evaded, because that's the supposedly shameful bit. And it is.

      3. OK, I admit I went too far by saying courts don't convict people of "evasion" (that's what comes of me trying to multi-task!), but otherwise I'm not convinced by what you're saying. S144 Finance Act 2000 introduced the offence of 'fraudulent evasion' , but it doesn't define "evasion". It's main purpose seems to be to set out sentencing requirements. I remain pretty sure that "evasion" isn't defined in legislation but rather that it's defined only by reference to case law (i.e. by common law).

      Anyway, on reflection I think the reason they don't use the word "evasion" for the legislation that requires publishing defaulters' details is to make it clear that it requires a civil, rather than criminal, standard of proof. A deliberate default is defined by reference to tax penalties which, in turn, require a civil burden of proof.

      So I stand by the main point of the answer I first gave above, which is that there's not much difference between the two concepts, certainly not for the purposes of everyday understanding. This is subject, of course, to the point about burden of proof.

      4. Ah. Are you talking about MTIC? I thought you were alluding to alleged avoidance by Vodafone. Sorry. My understanding was that things have gone a bit quiet on the MTIC front because detection and prevention mechanisms now make it much less worth attempting. I'd guess that most of the easy cases were dealt with before this legislation came in, while there are bigger ones that have been/are being prosecuted and, if I'm reading this legislation correctly, it's only cases where civil penalties have been imposed that are in scope.

      5. Possibly, although I think the NAO's/PAC's settled view relates to something slightly different. In the interests of (relative) conciseness I'll leave it there.

      Stew G

    5. 18:44,

      So many points; so few paragraphs! :)

      Read the legislation. This is very clearly about deliberately submitting inaccurate documents (i.e. lying), not about failing to pay legitimately declared liabilities. That, and the fact that this doesn't criminalise anyone (rather it publicises what they've done, which, as I say, I'm still ambivalent about), deals with three-quarters of your comment.

      The contrast with bankers is a good point (though it's an intriguing use of the word "moot"). Whole books could be written on the relative morality of the two, arguing that either is worse. I certainly won't try to tackle the subject tonight.

      Stew G

    6. As fine a case for finally removing criminal investigation from HMRC and leaving them to all things civil! Possibly why the NCA has crime at the centre of its title.
      As for the bankers? Get real, as long as the customers continue to pay the fines the Treasury will gladly pocket the amounts. Don't forget those that sign off on the legislation are part of the 'act' or would that be "actus reus" and usually have some form of interest in maintaining the overall illusion presented to the sheeple by the mainstream media.
      Ever remembering Dennis Healy being quoted thus; "The difference between evasion and avoidance is the thickness of a cell wall".
      Rumpole would say "I rest my case..."

  3. A good proportion of those 'named' are limited companies which presumably will not be feeling any 'shame' as they are inanimate. No doubt these will be wound up in due course with all the taxes and penalties being unrecoverable as the companies will probably have no assets. In due course some of the businesses will be appearing under some different guise in the future.

  4. 23:22 I was trying to answer the question raised at 11:21 about the distinction between evasion and deliberate default. The former is a lot easier to prove in a criminal court than the court than the latter. I appreciate that the naming and shaming has nothing to do with the criminal itself but that in part is one of the reasons why I think it is pointless. If you want to seriously punish serious evaders then banging them up in prison might seem the best response. Recovering all the money due in tax and penalties might be another. Sticking their name in a PDF is not going to deter anyone and the information about habitual defaulters is probably going to be in the public domain anyway via CCJs etc . I am sure most debt rating agencies are going to be more interested in the latter rather than HMRCs bad boy list. The real disgrace this naming and shaming exercise points out is how poor HMRC is at recovering the debts it already has assessed as payable on it records. I believe the amount in arrears is now somewhere in the region of £18 billion and this sum does not include the £3 billion written off in recent years as unrecoverable. The lack of attention and resources devoted to recovery of these debts is little short of scandalous. There is precious little point HMRC spending more money investigating invasion if it then fails to actually collect the amounts due. You do wonder how much of the tax and penalties on that naughty boys list will wind up simply being remitted as unrecoverable.

    1. Well put, thought provoking and cuts to the issues with no prevarication or side slip.
      HMRC would find difficulty in getting the old deposit back on m/t pop bottles, let alone these debts.

      However I have said it before, not only would this lot find difficulty in the proverbial running of a booze-up in a brewery, it remains one of the wonders
      of the world that they can find their collective @r$e$ in a dark cupboard in
      order to keep their heads up them so long!

      Look forward to further informed postings pilgrim!

    2. It's ironic that the last poster talks about prevarication and "side slip" given that (s)he and the one above keep talking about debt collection. This legislation has nothing to do with unpaid/uncollected debts. Nor is it about deterring hardened criminals/"habitual defaulters". It's about influencing the decisions of would-be, probably relatively small-time evaders.

      It doesn't directly affect the strategy for investigating suspected evaders, nor the strategy for collecting debts. It is separate from those strategies so, if there is "side slip" or prevarication going on here, it is in the tendency, born I suspect out of ignorance, of some to confuse the 3.

      Stew G

    3. It is amazing that such a frenzy should be caused on the surface of these murky waters by the casting of small amounts of ground bait. ..

      The whole policy is flawed and risible, especially as so many of those "named and shamed" have obviously had to struggle to make the 'cut' at £24k. A quick analysis indicates that some of these so named have been "defaulting" to the tune of some £40/day! Talk about scraping the bottom of the barrel?
      If you believe that the fact that you can avoid paying the calculated debts and penalties plus interest are unknown to the individual on the Clapham bendy bus, let alone believe that there is any real deterrent value in HMRCs "name and shame" policy then you and Excom really need to get out more.
      At least you have added to the entertainment value.

    4. If you're so sure of what you're saying, why on earth do you feel the need to personalise this by suggesting I need to get out more? Try not to lose sight of the fact that you too are spending your time online anonymously arguing about tax. :)

      As I said in my very first comment, implementing this legislation/policy costs peanuts, and nobody here seems to be disputing that. Because it costs so little, even if its deterrent effect only, as part of a package of measures (think posters in pub toilets, etc), even contibutes to deterring a small number of people, it easily pays for itself. I'd reiterate that, as I also said, I have concerns about the civil liberties implications of this, though. The people named haven't been found guilty to a criminal standard so I'm not convinced it should have been introduced, but in pure economic terms, which are what Ken's original post focused on, it stacks up.

      You've raised a few specifics.

      "so many of those "named and shamed" have obviously had to struggle to make the 'cut' at £2[5]k."

      It has to be relatively small fry who are named and shamed, because it's relatively small fry that the deterrence effect is targeted at. If it's all cases with multi millions involved, someone first considering whether to start evading a small amount of tax - the teacher deciding whether to notify for self assessment when starting to do home tutoring; the taxi driver considering doing an extra shift a week off the books; the newsagent who first learns how to reprogramme the till; etc. - could jump to the conclusion that HMRC is interested in the big boys but not them.

      There's also the fact that evasion is massively concentrated at the lower end. There is a small number very big cases but a very large number of smaller ones. We'd therefore expect the ones where the tax is over £25k to be clustered towards £25k, as we see in the pdf. It's Benford's Law in action.

      "the fact that you can avoid paying the calculated debts and penalties plus interest are [known] to the individual on the Clapham bendy bus"

      I'd dispute this, as I reckon most people on the bus probably think, rightly or wrongly, that the big boys can get away with that; they don't think they can. Witness a large number of comments to that effect on this and other blogs. However, if we assume your assertion is true, it's actually an argument in favour of naming and shaming! Naming and shaming is supposed to work in two ways: it publicises to would-be avoiders that HMRC comes after people like them and it also ups the ante if you're caught because, as well as having to pay the tax plus a penalty, your neighbours find out that, on the balance of probabilities, you're a liar and a thief. Even if people believe, as you suggest, that they'll be able to wriggle out of the first two if they're caught, they'll know they wouldn't be able to prevent the third, which is immediate and automatic.

      Stew G

    5. Would not have expected you to have an oversensitive nature or be unable to detect further tongue in cheek postings (previously outlined), only advice I can offer for those posting on such forums is depart the kitchen if the temperature appears too high.

      The preventive effect of name and shame is low, quoting Benford's Law when considering, comparing or analysing HMRC statistics and data does not change the facts, these are mainly small fry. There are insufficient resources in HMRC to address the problems of cash rich traders. It matters not whether they use secret, open source or 3rd party provided information, there are insufficient front line staff to do more than scratch the surface.
      In a recession, the law of survival will outweigh the laws of the taxman andthose that merely peek into the open door will now stride through it, a fact of life.
      So, don't take things personally, do get out more and don't panic dear, it's only a blog after all and HMRC is still shite!

    6. Haha. Seems I'm not the only one failing to spot tongues in cheeks. I would have expected my smiley to have been a clue even you would have picked up on, though.

      Actually, I think everything you've said in the substantial paragraphs (such as they are) of your comment is, for once, more or less correct. It just doesn't remotely contradict anything I've said. Presumably you realised that when you wrote it, which must mean ... yes, it must mean you agree with me!

      Always so nice when we're in harmony around here.


    7. I am humbled and feel the need to apologise for misinterpreting your tongue in cheek as an attempt to be nice, sorry; (
      As for harmonious debate, all for it, what's next, tea and scones?
      The wonders of the human mind...
      As Cousteau said;
      "The happiness of the bee and the dolphin is to exist. For man it is to know that and to wonder at it".
      Finis :)

    8. I do wish I had some of whatever drugs you're on.


    9. Whoa, steady on girls, that's getting a bit personal!

      Bit of moderation required Ken, the kids are misbehaving a wee bit?

      Keep it clean children, otherwise no sweeties!

    10. A question Stew G

      So what evidence does HMRC possess that this list is actually succeeding in deterring tax evaders ? Do they have any figures to suggest it is more cost effective than deploying resources to increase the likelihood of evaders being caught and then actually being forced to pay over the outstanding tax due ? I am afraid on the surface this looks like just another primitive attempt at 'nudge' psychology that is almost certainly doomed to failure since the people targeted are almost certainly not the personality types likely to respond to that sort of persuasion. On the contrary like most border line criminals the only risk they are likely to consider is how likely they are to be to get rumbled by the taxman and what is the likely punishment if that happens. At the moment from what I can see the answer to these questions is that the chances of getting caught is small and the likelihood of being forced to pay over their ill gotten gains even smaller.

      To me it seems clear that HMRC is still not serious about tackling evasion and they care even less about actually collecting the tax due as the huge uncollected arrears show. So instead of tackling that situation with practical measures they just continuously bleat that 'got a little list' like Koko in the Mikado. It is token response to a huge problem.and gesture management at its worst.

    11. Apologies for the delay - I missed this comment.

      I'll come to your question about evidence shortly. I'd first like to challenge the assumption implied in your second, and last two, sentences, that HMRC is diverting a significant amount of resource away from investigating evasion towards doing this. I'd guess that this measure involves the inspector filling in one extra form among the several they have to fill in anyway when they nab someone to the tune of £25k+ and copying and pasting a standard paragraph into the 'here's the damage' letter; a junior admin person spending about half a day compiling the list; probably a solicitor or similar spending at most a day casting their eye over the list; someone in comms spending a couple of hours bashing out a press release; and a senior manager spending 2 minutes glancing at the latter then signing it off. Being generous, it's probably a total of about a man week. How many evaders do you think an inspector catch in one week? I'd guess it's about 0.25. As I've already said, this measure costs nothing.

      You say that they're doing this “instead of tackling that [evasion and non-payment] situation with practical measures”, but it's not an 'either-or'. It's possible to do a small thing like this, which doesn't materially detract from actual compliance work and make bigger changes. Direct Recovery of Debt, for example, is quite clearly a “practical measure”: it's a shockingly bad idea in terms of civil liberties (as Ken has pointed out at length), but it does demonstrate that naming and shaming, though a small thing, isn't tokenism instead of more dramatic steps being taken.

      Your question about evidence is a fair one, and one to which I don't know the answer. I certainly can't find anything HMRC has published showing analysis of the impact of this since it was introduced.

      To be honest, though, I'd be surprised if there were any such evidence, or at least if there were any yet. This is because:

      - It's very difficult to measure. It is possible to get a very rough indication of the number of people who are evading tax from year to year. HMRC and its predecessors have routinely done research on this for years, but it's necessarily very crude because of the size of the population, the need for cost restraint and the fact that, by definition, evaders won't volunteer to self-identify in the name of statistical validity. Next, there will be lot of factors driving the year-on-year variation in the number of evaders, of which this deterrent effect will be just one and, as I've said, it probably won't be a particularly big one (but as I've also said, that doesn't matter, because it's basically free to do this), so it would be almost impossible to pick out the extent to which it had an influence on people's decisions.

      - It's also very early days. The first batch of names was published in February 2013. Most of any deterrent effect is likely to impact on people who might have decided to start to evade tax after the start of the 2013/14 tax year (if you're going to do evasion properly, you don't just put the wrong number in the tax return; you start planning it before you receive the income on which you're evading tax). Most 2013/14 returns won't be in yet.

      However, what I'd also say is that the near-impossibility of robustly proving that there is a deterrent effect, for the reasons above, means it's also nearly impossible to prove that there isn't one! Given that:
      - doing this naming and shaming costs, for all intents and purposes, nothing; and
      - intuitively, it should work (would you really want your family, next-door neighbours or, worse, employees seeing your name on that list!?)
      the burden of proof actually lies at least as much with you as with me.

      Stew G

    12. (As an aside, HMRC did publish a paper about evidence for deterrent effects of naming and shaming in 2010. Unfortunately, and very disappointingly, it doesn't have references. As such, I don't take a lot of support from it. If you are genuinely interested in this question (as opposed to just using it rhetorically), may I suggest a Freedom of Information request for (1) references to the studies cited in the paper and (2) any evidence on the efficacy of naming and shaming since they started doing it. (I'd do it myself, but you can't really use false names for FOI requests, so I'd probably get fired!)

      Thinking about this further, early names were from specific parts of the country, so it's possible they were piloting it with a view to establishing its efficacy. There may be some evidence either way after all - get that FOI request in!


  5. Correction, £25k not £24k, not that a grand makes much difference...

  6. For those without the will or ability to research, here are a few gems of knowledge from the website of the National Crime Agency;

    Economic Crime Command
    Fraud is a broad term which includes the following areas of loss:
    attacks against the tax and benefits system...
    A specialist department, Civil Recovery and TAX (CRT), also sits within the ECC for when it is not feasible to secure a criminal conviction...

    Noticeable in its Suspicious Activity Reports (SARs) Annual Report 2013 is a little nugget;
    P. 17 HMRC increasing the use of SARs
    para 5 last sentence
    "HMRC prevented estimated revenue losses of £16,230,012 from 2155 additional consent requests."
    Next para;
    "The HMRC Consent Team handled 20 requests for consent as a result of the Liechtenstein Disclosure Facility (LDF).......prevented revenue losses of £42,985,000."

    Couple of issues here;
    How much longer will/should HMRC retain its criminal, let alone civil powers, as, if suitably resourced NCA could undertake them?
    wrt prevented revenue losses - has this been the subject of interest to the PAC/NAO recently or did I imagine it?

    A warm welcome to fellow pilgrims!