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MPs criticise HMRC over Tax Gap 16/03/12

According to the Treasury sub-committee, HMRC needs to be more accountable and open about the way it settles large tax disputes and that the Revenue’s calculation of the UK tax gap is “flawed”.
The report comes amid growing criticism over the way HMRC settles large tax disputes with companies after it admitted making mistake in a tax dispute with Goldman Sachs.

George Mudie, MP, chairman of the sub-committee commented that although HMRC had done some “good work” in ensuring tax compliance there is still a long way to go if the tax gap – the difference between the amount of tax HMRC thinks it is owed and what it actually receives - is to be reduced significantly

A report by the National Audit Office said that HMRC had narrowly missed a target to increase tax yield by clamping down on tax evasion.

The Treasury sub-committee report said that the HMRC’s calculation of the Tax gap is “flawed and risks focusing the minds of its employees on the wrong task: maximising revenue at all cost rather than ensuring that all taxpayers pay the right amount of tax.”

Other recommendations and conclusions in the report include:

  • HMRC should consider establishing a general tax disclosure facility to run alongside its targeted campaigns
  • For offshore campaigns to be successful, those who do not take up the opportunity to disclose unpaid tax to HMRC should be prosecuted
  • he new “assurance commissioner” who will be appointed to oversee all large tax settlements should appear before the subcommittee
  • HMRC’s proposed code of governance for tax dispute resolution should be explicit that the same rules apply to settlement of tax disputes with its large corporate customers as apply to settlements with all other taxpayers

When compiling its report on the UK tax gap the Treasury subcommittee questioned experts from the Chartered Institute of Taxation, the Association of Chartered Certified Accountants, and Tax Research UK.

Stuart Coleman, Manager of the Tax Department of ABDS says:
 “The committee’s recommendations should help HMRC more effectively in tackling tax evasion and criminal behaviour with suitable penalties, prosecution and other deterrents.”

If you need any help and advice with your Tax compliance, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help in all your financial planning and business advice.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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