HM Revenue & Customs (HMRC) plans to seize an extra £4bn in 2010/11 through more aggressive tax investigation work and tougher powers, warns an accountancy firm.
Chartered accountancy firm UHY Hacker Young says this is a 33% increase on the £12.1bn of tax clawed back during 2008/09, taking the total HMRC target to £16.1bn in 2010/11.
To achieve such a high yield, HMRC will need to widen the scope of its enquiry work to include marginal cases. This increases the risk innocent businesses are caught up in its tax net, says the firm.
The company also questioned whether the Liberal Democrats' pledge to collect another £4.6bn by clamping down on tax avoidance is achievable without creating unreasonable burdens for innocent taxpayers.
Tax partner at UHY Hacker Young Clive Gawthorpe says: "£4bn more tax is a massive increase which shows how urgently the budget deficit needs to reduced.
"To achieve such an extreme target, HMRC will be forced to come down hard on legal tax avoidance and illegal evasion."
However, he warns HMRC's risk profiling is already "far from being perfect".
"Many enquiries yield very little or no additional tax at all, so how will HMRC improve risk profiling in order to better avoid causing detriment to innocent taxpayers?"
Tax investigations can be hugely costly to taxpayers in management time, insurance and advisory fees, he says, while much of the tax HMRC claws in through investigations is not tax that has been deliberately evaded.
"In many cases it is the result of HMRC reinterpreting tax law. If an individual or business can't afford to challenge HMRC's decision through the tribunals and court system, then HMRC wins," he says.
HMRC is currently seeking an extension of its powers to include the right to be able to routinely ask all companies for check, store and provide data on their trading partners. It also wants more powers to charge penalties for late payments of in-year pay as you earn (PAYE) tax.
It has recently gained the right to visit business premises without giving advance notice. There is also a new penalty regime which replaced fixed fines (for example, £100 for late filing) with tax-geared penalties for making an inaccurate return and failure to deliver information to HMRC within the deadline.
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