Budget is a major assault on tax avoidance and evasion, says KPMG

Chancellor of the Exchequer George Osborne yesterday promised to arm stretched HMRC tax investigators with a £800 million warchest of extra funding over the next five years to combat tax evasion and non-compliance.

Mr Osborne said the move, announced as part of the Summer Budget, is designed to raise £7.2 billion for the UK Treasury.

Last year, HMRC brought 915 tax evasion prosecutions, up from 770 for the previous 12 months.

A breakdown of the new funding showed that only £60m will be devoted to serious and complex tax-crime investigations, though this sum would largely be focused on wealthy individuals and companies.

Although the tax authority’s annual report does not break down which prosecutions it classes as serious and complex or which relate to wealthy tax evaders, Mr Osborne said he hopes to treble the number of such prosecutions, taking the annual number to 100 by the end of the parliament, raising £600m in the process.

In particular, HMRC will have the funds to:

Responding to the announcement, Jon Meeten, head of tax at KPMG in Scotland, said: “In years gone by, Chancellors would have made great play of the tax saved by closing loopholes that had been used in tax avoidance schemes disclosed under Disclosure of Tax Avoidance Schemes (DOTAS).

“More recently, this source has dried up as the last Government made great strides in stopping this sort of behaviour and George Osborne has tended to meet his target though changes in tax legislation that can be seen as removing unfairness.

“There is some of this in today’s Budget announcement but it is mainly in the realm of personal tax such as changing the non-dom rules, rather than in the business tax world.

“In this Budget, the Chancellor has placed greater focus on operational rather than legislative changes which see HMRC receiving an £800million package which appears to be directed at reducing the tax gap - £34 billion when last published.”

Mr Meeten added: “There will also be additional resources and powers for HMRCs large business directorate where the Chancellor will have to wait until the OECD BEPS project reports later this year before he can complete his clampdown on perceived abuse by large corporates.

“Taken together, this adds up to a major assault on tax avoidance and evasion, and HMRC will be very pleased with the vote of confidence George Osborne has given it today. The more difficult question will be how HMRC will be able to find the people it will need, many of them requiring specialist skills, to put this plan into action.”