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HMRC has upped the sum of actual cash collected through tax investigations.
HMRC collected £13bn in cash from tax investigations in 2018/19, up 27 per cent from £10.3bn in 2017/18, new research shows.
The jump in cash collected has been partly driven by payments HMRC has received ahead of the Loan Charge being introduced in April 2019, according to UHY Hacker Young.
Any individual who had used avoidance schemes to reduce their income tax bills had to pay any tax owed to HMRC an April deadline or face extra charges.
It is estimated that 50,000 people who used these loan-based avoidance schemes had to pay back tax on up to 20 years of income in a single financial year. Some individuals were faced with tax bills stretching into hundreds of thousands of pounds, UHY Hacker Young revealed.
Clive Gawthorpe, tax partner at UHY's Manchester office, said: “HMRC has managed to collect a bumper yield from investigations into individuals but it comes at a cost”
“HMRC’s approach to the loan charge was heavily criticised for being draconian but it pushed on with its schedule regardless. A bigger cash hoard was the net result.”
The company’s research shows that the high level of cash collected could also reflect the results of HMRC’s offshore tax campaign last year. This required individuals to declare any overseas income or gains by September 2018, and pay any liabilities owed, or face penalties of up to 200 per cent of the amount owed.
However, despite the increase in cash collected last year, actual cash only makes up 38.5 per cent of the £34bn HMRC claims to have collected from investigations. The rest is made up of hypothetical estimates, such as ‘revenue losses prevented’ and ‘future revenue benefit’.
These measures represent theoretical ‘income’ made by discouraging taxpayers from attempting to avoid or evade taxes, either this year or in the future, rather than real money collected.