Accountants help HMRC punish those guilty of tax evasion

HMRC has announced a four week consultation into proposed amendments to the tax treatment of business entertainment for overseas customers.

Changes to the existing regulations are due to be implemented on the first of May this year. Currently, businesses cannot reclaim VAT on entertainment of overseas business customers. Under the new amendment, VAT can be reclaimed providing it is classed as reasonable.

Meanwhile, the Revenue is planning to monitor people who have previously been found guilty of tax evasion. 900 individuals will be closely monitored for between two and five years, depending on the severity of their offence. Letters will be dropping through doors soon informing the recipients that their affairs will be subject to close scrutiny under the Managing Deliberate Defaulters programme.

HMRC has designed the programme after consulting with accountants. Some of the measures that could be taken include making unannounced inspections, requesting additional documentation to back up tax returns and conducting in-depth compliance checks.

Customers who are registered for VAT may also find their right to use schemes such as cash accounting is withdrawn.

This programme does seem to be a strong deterrent but whilst it sounds like a good idea in theory, will HMRC get it right? The department has been guilty of a catalogue of errors in the past year and experts are concerned that it might jump in with both feet before ensuring that the tax evasion was deliberate. So far there has been no mention of an independent body monitoring HMRC’s handling of this programme.

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