Sin Bin: 30 per cent more defaulters referred to special monitoring unit

The figures, published in response to a Freedom of Information request submitted by accountancy firm Baker Tilly, show that a total of 6,051 individuals and businesses were referred to the Managing Serious Defaulters (MSD) programme in 2014/15, up from 4,624 in 2013/14 and 1,094 in 2012/13.

Under the MSD programme, HMRC closely monitors taxpayers to make sure they file all their returns and make all their payments on time.

Using existing powers more robustly, the department can also make announced or unannounced inspection visits to business premises to check business records or assets and carry out rigorous compliance checks into all or part of a defaulter’s tax affairs.

These powers also extend to individual partners, directors or officers of a company, or any business that a known defaulter is involved with. In other words, all business activities of people subjected to MSD scrutiny will be under HMRC’s microscope.

There is no right of appeal against inclusion in the programme and HMRC can continue to monitor defaulters until it is satisfied they are meeting all tax obligations and have changed their previous non-compliant behaviour. For most people, this can last for between two to five years.

Serious defaulters include those who have been charged a penalty for deliberately under-declaring income in their tax returns. Recently released data, also obtained by Baker Tilly, shows that the number of individual penalties imposed for such deliberate behaviour almost trebled last year, rising from 5,162 in2012-13 to 14,401 in 2013-14.

Stephen Hay, Baker Tilly’s head of tax in Scotland said: “The increase in the numbers of people being referred to the Managing Serious Defaulters programme signals that HMRC is getting much tougher on those who actively seek to sidestep their tax responsibilities.

“The MSD programme is equivalent to a school detention where an errant taxpayer’s behaviour will be under close scrutiny by the taxman. HMRC has significant monitoring powers, and those individuals and businesses referred into the programme can find the experience extremely uncomfortable and onerous.”

“As we enter a new Parliament, there will be immense pressure on HMRC to clamp down on defaulters in an attempt to reduce the tax gap, so it’s likely that we’ll see more people referred into the MSD programme in this financial year.”