Calls to the hotline run by HMRC to catch out ‘tax-dodgers’ shot up last year, according to new figures.
As many as 72,000 anonymous tip-offs were received by the official helpline last year, according to figures from Bloomsbury Professional, an average of more than 300 separate calls every day.
The hotline is available for members of the public to report any suspected case of tax evasion. Considering the fact that HMRC also accepts tip-offs via email and post, the true extent of the rise in reporting may be considerably more dramatic.
HMRC has not released any information indicating how many of the tips it has received actually led to a full investigation, nor indeed whether any wrongdoing was found or tax reclaimed. This lack of data has prompted the authors of the report to point out that growth in the number of callers voicing their suspicions does not necessarily guarantee that more tax revenue is coming in as a result.
In fact, the National Audit Office (NAO) previously denounced the hotline as the least cost-effective option for gathering intelligence on tax evasion. NAO found that the line generated twice the amount of money that was required to keep it in operation, which is a relatively small return on investment for a project of its size. The most recent data on the tax collected as a result of the helpline was carried out in 2006, but over that year it raised £2.6 million – a far cry from predictions of £32.5 million.
A number of voices in the accounting sector have even questioned whether the tax authority has the resources to handle such a high volume of calls and tips, given the budget cuts it has faced in line with the government’s austerity drive.
Indeed, many of the calls received so far are believed to refer to tradesmen receiving cash-in-hand payment. Although this can mean that sole traders in sectors such as construction, plumbing and electrics end up having to pay additional income tax, these sums are normally relatively small. No specific information has been released on the content of the calls or to whom they might refer, making it impossible to tell whether any limited company or umbrella contractors have actually been affected.
The report’s authors say that the rise is largely down to growing public interest in tax avoidance and evasion. With wages rising slower than inflation and tax burdens growing under government austerity measures, the public is increasingly passionate about making sure that everyone, business or individual, is paying the right amount of tax.
Of course, there is a difference between tax avoidance and tax evasion, while both are entirely set apart again from the legitimate tax planning which ensures that businesses and individuals are not paying more tax than they need to. However, there is concern in some quarters that the distinction is not particularly clear in the public consciousness.
Consequently, the report notes that the government needs to beware of overzealous members of the public making claims which will eventually come to nothing.