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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

HMRC targets work sectors and geographical areas deemed high risk for tax evasion

Author: Azizur Rahman  7 December 2012
3 min read

The tax man is on the hunt for non-payers. That means the right legal advice is vital for anyone in his sights.

It is crackdown time again, according to HMRC.

This time it’s tackling tax dodgers that it suspects are working in London’s legal profession, in grocery or retail in South and North Wales, the North West and South West, in hair and beauty businesses in the North East, in restaurants in the South East and Solent and in the motor trade in Scotland. HMRC hopes to recoup £19.5M in unpaid taxes from the operation. Earlier this year it targeted restaurants in the Midlands, South West and South Wales, hair and beauty businesses in Northern Ireland, pubs and clubs in Scotland and the motor trade in South Wales, the South West, Yorkshire, Nottingham and the North East. On that occasion, the tax man aimed to recover around £30M from examining the records of the businesses it put under scrutiny.

It is all part of the government’s £900M investment in HMRC as it seeks to hit the tax avoiders and evaders where it hurts the most. Similar taskforces launched in other sectors last year are apparently on course for bringing in an extra £50M into Treasury coffers. Last year, restaurants, fast food outlets, scrap metal dealers, landlords and construction companies in various parts of the UK came in for close-up examination by the Inland Revenue. And after that, market traders, taxi firms, property rental companies and restaurants found themselves coming in for special attention in various parts of the UK.

The work sectors and the geographical areas targeted were decided on by HMRC because of what it called “evidence of high risk of tax evasion’’. So although those under scrutiny may vary in terms of the work that they do, where they do it and the size and nature of their workforce, they all now have one major thing in common: they have to show that their business dealings are all fine and above board. For those facing examination, it will not be enough to know that their dealings are legitimate – if that is the case. They face the challenge of having to prove that to the tax man. And whether it is a barrister in the capital, a Bala grocer, a Newcastle nail technician, a Thai restaurant in Teddington or a Dundee car dealer, they will all have to satisfy investigators who are looking for every possible way of claiming tax they believe is due to a government that has invested millions in these crackdowns. Online traders, such as those on eBay and Amazon, have also come in for close examination, alongside Avon reps, Ann Summers party hosts, doctors, dentists, plumbers and electricians.

HMRC has recently been going to court and winning cases where the VAT allegedly evaded has been as low as £40,000. The strategy seems to be one of bringing more prosecutions, even if these are for lower amounts than normal. And the message seems to be get your house in order or pay the penalty.

So how do you get your house in order? Or prove that it already is in order? Ideally, any such HMRC scrutiny would have been pre-empted by having a fully-documented and recorded accounting system in place. But such a system can only work properly – and legally – if it is working within the confines of all aspects of the law. To be sure that any business is legally compliant will require the services of a legal expert. Only a solicitor working in the field of compliance can recommend measures to ensure that a company is not breaching any aspect of the law. This will cost money. But if the alternative is criminal prosecution, custodial or financial penalties, loss of trade and damage to reputation, it could be a small price to pay.

At Rahman Ravelli, we are constantly representing companies and organisations that are under investigation over their tax affairs. Our decades of experience in dealing with tax investigators mean that we know what course of action to take, whatever situation a client finds themselves in with HMRC. As soon as someone realises they are being investigated they have to get the right legal representation and let them handle the negotiations on their behalf. But they also have to accumulate all the relevant information. HMRC is now very keen to use its powers under Code of Practice 9 (COP 9) to force companies to disclose any underpayment of tax. This means that acting properly from day one – by having the right legal representation – is now more important than ever. HMRC wants to track down what it sees as unpaid tax. But it also wants companies to be more open about their affairs and disclose any wrongdoing before its investigators discover it. This means that anyone under investigation can find themselves walking a tightrope; not only having to decide if they have done anything wrong but also having to choose what course of action they should take. Tax law is evolving as HMRC looks to shut down the routes used by tax avoiders and evaders. Penalties ranging from 10% to 200% of the tax that HMRC believes is payable have been imposed, making it increasingly dangerous for companies under investigation who take the wrong step.

The crackdown may be happening in various places, to various businesses at various times. But the right advice is needed everywhere, to everyone who is under facing close attention from the tax man.

Azizur Rahman C 09369

Azizur Rahman

Senior Partner

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Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.

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