HMRC have unveiled their enhanced monitoring programme of those taxpayers and businesses that deliberately evade tax aka ‘deliberate defaulters’.
Deliberate defaulters represent a high risk to HMRC who intend to correct their behaviour and ensure that they pay the right amount of tax. These wrongdoers may be placed into the enhanced monitoring programme, called Managing Deliberate Defaulters (MDD), where all aspects of their tax affairs will be closely monitored.
Where a business is a partnership or a company, the individual partners or directors or officers of the company who were found to have evaded tax may be those placed into the MDD programme. It may however even be necessary to include the partnership or company into the programme. Those who have a controlling interest in other businesses may also have those businesses thrown into the mix too.
The extent of HMRC’s monitoring will depend on the seriousness of the evasion and how much of a risk the defaulter poses in continuing to attempt to evade tax. There are various ways that HMRC will survey a defaulter’s tax affairs which will include:
Making announced or unannounced inspection visits to their place of business to carry out pre-return checks of their books and records;
Requiring that additional information or documents are sent in with the defaulter’s tax returns. HMRC may also require the same for any other business that the defaulter controls;
Conducting in-depth compliance checks into all or any part of the defaulter’s tax affairs;
Observing and recording the defaulter’s business activities and cross-checking details in their accounts. For example, HMRC may make ‘test purchases’ or inspect the records of one or more of their supplies or customers.
Anybody placed into the MDD programme will be notified in writing and will normally remain in it for between 2 – 5 years. Once HMRC is satisfied that the taxpayer has mended their ways they will remove them from the programme and notify the person of this in writing.