HM Revenue & Customs (HMRC) considers publishing the details of individuals and businesses who deliberately get their tax and/or VAT wrong, where the potential lost revenue (PLR) exceeds £25,000.
When HMRC undertakes a criminal investigation and successfully prosecutes, the individual or business entity concerned has their details published as a matter of record. However, the tax legislation at Section 94 FA 2009 allows HMRC to publish the details of those deliberate defaulters who incur a civil penalty for deliberate or deliberate and concealed behaviour.
Before any details are released, HMRC considers what it calls the 5 publication questions.
What are the 5 questions?
- Has a relevant penalty been charged? A relevant penalty is a penalty levied for deliberate or deliberate and concealed behaviour, in respect of tax and/or VAT.
- Does the relevant penalty relate to a PDDD period? The relevant penalty relates to a PDDD period if the penalty is for a deliberate inaccuracy in a return or other document for a tax period beginning on or after 1 April 2010, or a failure or wrongdoing that occurred on or after 1 April 2010.
- Was the relevant penalty found as a consequence of an investigation? The meaning of investigation is not just restricted to when an individual or business has been subjected to a formal enquiry; it also means where HMRC has conducted a compliance check to review a tax position or VAT liability. Compliance checks include VAT Assurance visits and Employer Compliance reviews. A further consideration is whether there have been one or more investigations. HMRC can only publish the details in each single investigation.
- Is the relevant penalty a qualifying relevant penalty? The penalty has to be for deliberate or deliberate and concealed behaviour, where the deliberate defaulter has not earned the full reduction for the quality of disclosure. If the deliberate defaulter tells HMRC about the default, helps HMRC quantify the default and gives HMRC access to all the relevant paperwork, the full reduction will be earned and the answer to the question will be ‘no’.
- Does the qualifying PLR exceed £25,000? The qualifying PLR is the total amount relating to the qualifying relevant penalties. This is where the answer to question 3 becomes important. For example, an isolated Employer Compliance review results in a PLR of £5,000 for a deliberate default in 2012. The default attracts a deliberate penalty. The £5,000, on its own, is not enough to satisfy the publication criteria. However, if the Employer Compliance review is part of a wider cross tax investigation, which is deemed to be a single investigation, the £5,000 will be added on to the PLR from the other taxes attracting deliberate penalties. The £25,000 limit may then be exceeded.
Remember, the answer to all 5 questions has to be ‘yes’ for HMRC to give serious consideration to publishing any details.
When can HMRC publish the details?
HMRC must publish the deliberate defaulter’s details within 12 months of the date when the qualifying penalty becomes final. If there is more than one qualifying penalty, the 12 months starts from the point when all of the qualifying penalties become final.
Two sets of details have been published by HMRC so far on 21 February 2013 and 14 May 2013. The current HMRC list can be viewed here http://abytx.co/157kkRC
How long can HMRC keep the details published?
HMRC can only keep the information it publishes available for public access for 12 months. The 12 months starts on the day HMRC publishes that information.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.