Magazine article Management Today

How Taxmen Track the Dodgers

Magazine article Management Today

How Taxmen Track the Dodgers

Article excerpt

Last year the Inland Revenue recovered more than 4.7[pounds] billion from moonlighters and artful dodgers. Its tactics owe more to Sherlock Holmes than the traditional taxman. By Lorna Bourke

It's the letter everybody dreads.`I have reason to believe that you have an unreported source of income...' reads the bombshell from the Inspector of Taxes.

Last year the Inland Revenue rounded up more than 4.7[pounds] billion from taxpayers who had mistakenly omitted or underdeclared tax, and from individuals who had deliberately evaded tax - a sum equivalent to more than 2p on the basic rate of income tax.

At the Inland Revenue's central Compliance Investigations Department in London there are over 400 individuals beavering away, and several thousands more around the regions, who do nothing but conduct investigations into taxpayers they think may have a hidden source of income or profit.

They track down moonlighters - from `ash can' cash payments to doctors certifying cremations, to tour operators' couriers who pocket money taken for refreshments sold on-board coaches. They are hot on reading the small ads in newspapers, rounding up 'ghosts' who are unknown to the Revenue, working in the black economy - from painters and decorators to car-boot dealers.

Their activities have more in common with Sherlock Holmes than the traditional tax inspector. `A lot of it is cloak-and-dagger detective work,' says David Daly, a former tax inspector and now director of tax investigations at accountants Clark Whitehill.

Avoiding tax is legal - evading tax is not. Putting your money in a Swiss bank account or an offshore trust in the Bahamas, Panama, the Cayman Islands or some other tax haven may make life difficult for the tax investigators. 'There are exchange of information treaties which exist between some countries but there is little co-operation from the traditional tax havens,' says Daly. But don't rely on banking secrecy even here. `The Revenue will sometimes raid the UK subsidiaries of foreign banks and uncover foreign accounts held by UK residents,' Daly warns.

And in a world where more than one in three marriages ends in divorce, it is hardly surprising that a significant amount of information on tax evasion finds its way to the Revenue through divorcing wives, anxious to flush out foreign accounts and undeclared realisations of assets and profits in order to up the divorce settlement. …

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