HMRC has dropped the launch of new tax probes by more than 50% after the coronavirus crisis first erupted to focus on implementing the UK government's covid-19 plans.
A freedom of information (FOI) request by BDO, an accountancy firm, disclosed that between March and July, HMRC initiated 61,000 tax investigations — a drop on the 128,000 inquiries opened over the same period in 2019.
"Tax avoidance and evasion has not gone away and we expect there to be a stockpile of cases to be opened before corporate and personal tax filing deadlines of December 31 and January 31 respectively," Dawn Register, head of tax dispute resolution at BDO, told the FT.
Tax avoidance and evasion has not gone away and we expect there to be a stockpile of cases to be opened
However, as the lockdown eased in July, HMRC stepped up its compliance activity — when 14,000 new investigations were opened — an increase of 40 per cent on June's activity but still far below the 29,000 opened in July 2019.
According to another freedom of information request submitted by accountancy firm Saffery Champness, HMRC fraud and avoidance investigations yielded £610,292,968 for the Treasury in the financial years 2016/17 - 2018/19.
COP8 investigations, used by HMRC for complex cases where a taxpayer may have used an avoidance scheme or device to reduce tax liability, accounted for 43 per cent of the figure recovered in that period and COP9 cases, the civil route used by the taxman in response to to tax fraud, accounted for 57%.
The FOI request found 1473 COP9 and 924 COP8 investigations were opened in the period of three financial years.
Zena Hanks, partner in the private wealth team at Saffery Champness, said the accountancy firm had seen HMRC take an "increasingly hard line" on suspected avoidance in recent years.