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The changing world of compliance – the Chancellor announces the introduction of Taxpayer Protection Taskforce

The Chancellor spent the Budget talking about the plans for “Protecting the jobs and livelihoods of the British People – fixing the public finances and building the future economy!”

A number of measures have been introduced across direct and indirect taxes, with grants and the intention of ‘Help to Grow’ to make the UK more innovative and competitive.

As we know this all comes at a cost. Where there is a cost, there is a need to make sure that there is no abuse and so within The Chancellors speech was the introduction of the Tax Protection Taskforce (TPT). HMRC will have £100m to recruit over 1,000 new tax investigators (around 100 will be new to HMRC) to tackle abuse and crackdown on any Covid schemes which have exploited the UK Government support schemes; with an additional focus on other areas of avoidance, this represents one of the largest responses to a fraud risk by HMRC.

HMRC has already opened about 10,000 inquiries into suspected fraudulent activity and has begun some criminal investigations.

HMRC has spent the last 10 years strengthening their compliance activity and the TPT will be their next step. In fact, they have probably already started their recruitment drive. Some will be new to HMRC, those who have looked for a career change and others will move from other areas within the Civil Service.

HMRC is a different animal now to what it used to be. Many years ago time served and experienced staff were sought out to work across compliance and were usually well versed in all areas of taxation. Some of those taking up these new roles will not have that experience and knowledge, but they will have new skills and the technology to support them, literally at their fingertips. The days are gone when compliance officers used to stand on the top floor of their local office and look out over the High Street to see who to visit next; or travel to a local tax district office to undertake research to find those who might have made mistakes on an HMRC form.

Things are all the more sophisticated now. HMRC’s computer systems run algorithms across all of the data they receive online from employers and taxpayers to find those who are committing the more serious errors and not those who have made a mistake. There are serious criminals who see the grants, furlough and Eat Out to Help Out schemes as an opportunity to make large sums of money in a short period of time; and there are those businesses and sectors where HMRC believe that fraud is more widespread.

As HMRC has closed offices and rationalised their workforce, they have ended up with 6 very large regional offices. The pandemic has shown HMRC that compliance officers are able to work from home and undertake compliance checks remotely. They don’t need to visit an employer or taxpayer, it is all available digitally, without them having to move an inch. As those abusing the systems become more digitally acute and sophisticated with their scams, then HMRC are able to do the same. Those HMRC staff who had carried out a compliance review the same way their predecessors did them, now have the digital knowledge, skills and awareness to tackle the abuse effectively.

Compliance is now one of HMRC’s main areas of work. The Chancellor knows that the Government needs to invest more in this to keep up with those who will abuse the latest schemes which are aimed at re-building the economy and protect the jobs and livelihoods of its citizens. The TPT will be focussing on Covid-related fraud, which might extend further than the traditional areas of tax avoidance and evasion, as those committing these become more opportunistic and organised. The TPT will need to keep one step ahead, but they know that they have a monumental task ahead. They will need masses of data, in order to detect and stop the potential and actual fraud. To speed up the process HMRC will no doubt look to automated anti-fraud technology in order to make sense and meaning out of the data; but maybe they shouldn’t discount some of those traditional investigative skills that even the most advanced AI cannot yet provide. There may still be a need for some dinosaurs to work across compliance, but it is now a very modern world.

Only time will tell how effective these and existing compliance teams are. I suspect there will be a lot more headlines about fraud and abuse in the next couple of years as their compliance activity reveals the true extent of the issue. I suspect this combining of human and artificial intelligence is the only way for the HMRC compliance officers to tackle this abuse and relieve the taxpayer of this burden, who in time will have to ‘pay’ for any shortfall.

FEATURING: Steve Ashworth
Before joining the Bristol office of PKF Francis Clark in July 2019, Steve started his career at HMRC over 30 years ago and then spent… read more
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