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HMRC To Target Individuals With Investment Income

by Robert Lee, Tax-News.com, London

10 November 2008


HM Revenue and Customs (HMRC) is planning a new compliance campaign targeting taxpayers with investment income starting in Spring 2009, according to tax experts at accountancy firm UHY Hacker Young.

Documents obtained by UHY Hacker Young under the Freedom of Information Act reveal that an "interventions" campaign targeting taxpayers with investment income could affect far greater numbers of individuals than existing interventions aimed at taxpayers with property income and offshore bank accounts. Far greater numbers of taxpayers have investment income in shares, bonds and UK bank accounts than receive income from property or have offshore accounts.

In its response to the enquiry, HMRC also revealed it is about to issue a second batch of letters to taxpayers with offshore bank accounts, following the 5,198 letters sent to taxpayers with overseas accounts already. HMRC also disclosed it has sent 7,371 intervention letters to buy-to-let landlords within the last four months alone.

The new interventions involve HMRC contacting taxpayers by telephone, letter or in person to discuss aspects of their tax affairs identified as being at high risk of error. The interventions allow HMRC to avoid having to open a formal tax enquiry, which can be far more restrictive in terms of the areas it can probe.

Roy Maugham, Tax Partner, at UHY Hacker Young's London office, comments: “HMRC is ploughing on with new interventions targeting taxpayers with investment income despite the worry this will cause to taxpayers and the lack of success from previous campaigns. It seems particularly inappropriate at a time when many people will have made very significant capital losses on the same investments that might be providing them with a very small income.

“A campaign targeting taxpayers with investment income could be the most far-reaching of all in terms of the number of taxpayers contacted. Investment income encompasses a very broad spectrum of assets and could include anything from share dividends and bonds to interest on UK bank accounts. It could potentially take in far more taxpayers than all the other types of interventions put together.”

He adds: “While there is no legal requirement to comply with interventions, taxpayers who are contacted should take it seriously. Those who think they may owe tax should make an early disclosure as part of a negotiated settlement.”

According to UHY Hacker Young, figures released by HMRC last year revealed that the new interventions cost national taxpayers nearly twice as much as the additional tax they yielded. At the end of the six month pilot period to April 2007 interventions cost HMRC GBP1,071,101 to administer but yielded just GBP664,478 in extra tax, a yield/cost ratio of 0.62:1, or 62p for every GBP1 spent by HMRC. By comparison, non-business self-assessment enquiries have a yield/cost ratio of 268:1.


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