U.K. panel questions HMRC's ability to fight tax avoidance

This article was written by Ben Stupples for Bloomberg BNA. It appeared first on the Bloomberg Terminal.

Photographer: Jason Alden/Bloomberg

A U.K. all-party parliamentary group has launched an inquiry into the ability of Her Majesty’s Revenue and Customs (HMRC) to combat tax evasion and tax avoidance and to collect tax fairly.

The Sept. 8 consultation from the All-Party Parliamentary Group (APPG) on Responsible Tax raises questions about HMRC’s effectiveness at dealing with tax evasion and “aggressive” tax avoidance and ask respondents to rate the tax authority’s capability of collecting tax effectively.

The level of public interest in tax avoidance and evasion has been “significant” following LuxLeaks in 2014 and the release of the Panama Papers in April, which both helped to highlight “the scale of the challenge” that HMRC and other tax authorities worldwide face, the inquiry document said.

Worldwide Disclosure Facility

The publication of the APPG’s consultation follows the announcement of several measures from HMRC to combat tax evasion and tax avoidance, and to increase tax compliance.

On Sept. 5, HMRC launched the Worldwide Disclosure Facility (WDF), an online disclosure program giving tax evaders the opportunity to settle by the end of Sept. 2018 any unpaid U.K. taxes due on their offshore wealth. The timing coincides with the effective date for the OECD’s Common Reporting Standard, involving automatic tax information exchange agreements among revenue authorities in different jurisdictions.

The U.K. will also punish tax evaders with fines as much as three times the money owed for failure to disclose unpaid U.K. taxes on overseas income by the same 2018 deadline. They may also be forced to reveal any third parties involved in their tax planning, HMRC said in an Aug. 24 consultation document.

“Very tough new anti-avoidance rules are being put in place by the U.K. that will change the behavior of MNEs—not always to the U.K.’s benefit,” Tom Wesel, a partner at London-based Milestone International Tax Consultants, said to Bloomberg BNA in reference to multinational enterprises following the consultation’s publication.

“Even so, not everything will be caught, but the net is definitely being tightened while trying to keep the U.K. an attractive jurisdiction for inward investment.”

19 Billion Pounds

Responding to the APPG’s inquiry, an HMRC spokesperson said the tax authority achieved a record year in 2015, collecting 19 billion pounds ($25.2 billion) more in tax and duties than in 2014.

“Because of HMRC’s efforts, the UK’s tax gap—the gap between what should be collected and what is collected—is one of the lowest published gaps in the democratic world,” the spokesperson said.

“Alongside this, we’re now providing the best levels of customer service in years and have launched online tax accounts which are already being used by 4.1 million customers.”

The APPG, created in September 2015, is chaired by Margaret Hodgea member of Parliament from the Labour Party. She previously chaired the Public Accounts Committee, noted for questioning aggressive tax planning by multinational corporations and criticizing HMRC’s close relationship with them.

All-party parliamentary groups are informal political groups formed from members of the House of Commons and House of Lords, across political party affiliations.

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