HMRC investigations into UK savers’ tax affairs double
HMRC investigations into savers’ finances double amid concerns innocent mistakes on self-assessment tax returns may be punished.
The number of people being investigated by the taxman has doubled in one year, raising concerns that people who have made innocent mistakes are being targeted by the Government.
HM Revenue & Customs made inquiries about the tax affairs of 237,215 people last year, compared with about 119,000 in 2011-12, figures obtained by The Daily Telegraph show.
The number of self-employed people investigated has quadrupled in that time while annual prosecutions have risen sevenfold in three years.
The figures are evidence of the attempts HMRC is taking to minimise the estimated £35 billion of tax lost every year.
Experts have warned that people who have made simple errors when filling out self-assessment tax returns are “an easy target” for HMRC.
Tax experts warned that middle-class professionals, such as doctors, lawyers and teachers, were being targeted. They were more likely to settle any claims without dispute because they felt “anxious” when HMRC sent warning letters.
A Tory MP on the Commons Treasury select committee said last night that HMRC had been “given a mandate to aggressively go about trying to collect tax” and accused it of “nit-picking”.
Brooks Newmark said: “[People in] middle England are easy targets. The year-end comes, they’ve filled in their forms and sometimes there are some errors there that HMRC may in previous years have left or not necessarily picked up, but they are now nit-picking.
“It doesn’t take away from the fact that this money is genuinely owed. But it’s the approach with which HMRC goes about it. When HMRC writes you a letter it causes a huge amount of stress.
“I hope HMRC, if there is an innocent error … is not heavy-handed in the same way it should be if over two or three years they’ve seen a pattern of behaviour from that individual.”
Mark Giddens, a partner at the accountancy firm UHY Hacker Young, said HMRC was focused on collecting tax from “soft targets” such as “teachers, doctors and lawyers”.
These taxpayers were more likely to settle without dispute, he said.
“Rather than questioning the bill, these individuals will pay up,” he said. “As we all know, the revenue makes mistakes.”
An estimated 10 million people complete self assessment returns, which can run to many pages and are broken down into sections covering a range of incomes and capital gains.
Common “innocent” mistakes can often involve capital gains tax.
“This is increasingly an issue for people as property values rise,” said Tina Riches, a partner at the financial group Smith & Williamson.
“But there is a lot of misunderstanding. Lots of clients don’t know how the tax applies to second properties, for example, or what happens where properties are owned jointly.”
David Lawrenson, from Lettingfocus.com, a website for landlords, said: “There is a great deal of uncertainty among landlords about what expenses can be offset against income.”
HMRC has recently toughened its approach to tax collection.
It has hired an extra 200 investigators in the past three years taking the total to more than 1,600.
In this year’s Budget, HMRC was granted powers to remove money directly from people’s bank accounts.
MPs warned earlier this month that innocent people faced having money withdrawn under the draconian powers.
An HMRC spokesman said the increase in cases was because it was holding more compliance inquiries.
He said: “Inquiries are only opened where we believe there may be a problem causing the wrong tax to be paid.”