How to avoid being named and shamed on HMRC’s tax defaulters list

How to avoid being named and shamed on HMRC’s tax defaulters list

For more than 10 years, HMRC have been publishing details on their website of any individuals or corporate entities found to be deliberate tax defaulters, with liabilities, including penalties, in excess of £25,000. 

The ‘Deliberate Tax Defaulters’ list – you can read the latest here - is updated every quarter and provides real insight into HMRC’s compliance strategy and typically which industries and professions are being targeted and the focus of HMRC’s attention.

The following is an extract from HMRC’s website which sets out the criteria HMRC consider when compiling their quarterly tax defaulters list:

HMRC publish details of deliberate tax defaulters, these are people who have received penalties either for:

  • deliberate errors in their tax returns
  • deliberately failing to comply with their tax obligations

The law that allows this is section 94 Finance Act 2009.

We may publish information about a deliberate tax defaulter where:

  • we have carried out an investigation and the person has been charged one or more penalties for deliberate defaults
  • those penalties involve tax of more than £25,000

Their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults.

We will publish enough information to identify the:

  • deliberate tax defaulter
  • penalties imposed for their deliberate defaults
  • amount of tax on which those penalties are for

We publish this information once these penalties are final.

The lists are also intended to act as a deterrent to others, demonstrating that HMRC will not hesitate to name and shame those that choose not to play by the rules. The result being not only a hefty liability, but also being publicly outed with the potential damage that can cause to a company’s brand and reputation, which could affect their future trade or even existence.

A closer analysis of the most recent lists highlights one industry that regularly features due to high levels of non-compliance; and that is the construction industry. Historically, this has always been a sector which features high on HMRC’s compliance radar, whether that be for the incorrect application of the CIS rules or the incorrect status classification of self-employed sub-contractors.

While it is true that over the past several years HMRC compliance activity has significantly decreased from its normal levels, mainly due to the Covid-19 pandemic, nevertheless, one of HMRC’s seven key commitments to improve compliance which was deemed to be ‘on track or complete’ in its 2020/21 Annual Report was to: “Introduce a new package of anti-evasion measures, including measures to end tax abuse in the construction sector.”

And these lists are evidence of HMRC’s attention on construction as well as a stark reminder that HMRC are still very much targeting those that avoid paying the correct levels of tax and National Insurance, with construction being particularly prominent.

We expect levels of targeted compliance to certainly increase moving forward as HMRC departments return to business as usual activity with the task of raising tax and National Insurance receipts to help finance the enormous national debt that the Covid-19 pandemic has created. The Spring Statement gave further clues of the government’s intention to tackle tax non-compliance generally by investing in HMRC’s ability to collect outstanding tax debts, which will stand at over £4.5 billion by 2028-29, it said.

How can Markel help?

For more than 20 years, Markel Tax has been working alongside many businesses across a number of different sectors and industries advising on employment status best practice and offering compliance support and insurance-backed solutions to help eliminate risk. Our services include:

  • CIS and status compliance to review contracts and working practices for the engagement of self-employed and limited company contractors throughout the contractual chain
  • Retainer services to maintain compliance, be on hand for day-to-day queries and defend our clients against an HMRC review
  • Insurances to protect tax loss for end clients, agencies and labour-only service providers, which protects against PAYE and NIC liabilities, interest and even penalties

This allows our clients to focus their attention on running their business operation without the worry of an unexpected letter from HMRC. Our compliance and insurance services are designed to ensure that we can defend and protect you and your business.

If you would like to discuss any of our services or products and to see how we may be able to help to keep you on the right side of HMRC, click here.