Margaret Hodge on taxes

She wrote: \”In 2009-10, Her Majesty\’s Revenue and Customs calculated the tax gap as £35 billion — that is nearly 8 per cent of all tax due not being collected. In the same year, HMRC wrote off £10.9 billion in tax as uncollectable.\”

\”There are still people funded by the taxpayer, working in local authorities and for the BBC who avoid paying tax in this way.\”

Umm, Maggie dear. The £11 billion. As HMRC have already explained to you, this is people going bankrupt owing tax. This isn\’t quite tax avoidance, not really. This is just people going bankrupt.

2 thoughts on “Margaret Hodge on taxes”

  1. It’s not just the bankrupt though, quite a large proportion of the money is in relation to unpaid Corporation Tax, VAT, PAYE and NI owed by companies who have been struck off by companies house.

    Although being struck-off can be like a personal bankruptcy, it is more like a corporate death, with all debts being written off and all assets becoming bona vacantia.

    Much of these strike-off’s could be blocked or even restored by HMRC until debts have been settled personally by directors (not always possible), but instead HMRC just lets the directors off.

    So a good strategy for say a plumber with few corporate assets is to start a company, run it for a year without paying Corporation Tax, VAT, PAYE and NI and when the time comes to do the company house returns simply send in a cheque for £10 asking for the company to be struck off.

    3-months after the request, the company is dead and all of it’s tax debts with it. HMRC will neither pursue nor investigate where tax owed is less than several hundred thousand as they know that pursuing tax where there are no assets has little chance of success.

    The plumber in this scenario, just goes on to set-up another company and repeats the cycle.

  2. @ Tim – why don’t you make the point that the largest single element of the “Tax Gap” is the exemption from VAT of firms/self-employed individuals with VATable turnover of less than £77k 9corresponding to VAT of £15,400) – since there are millions of such individuals/small firms, the VAT foregone to save HMRC from administering millions of small payments runs into the £billions.
    @ John Galt
    Firstly, directors are not personally liable unless they have been culpably negligent or have signed a document making them so (eg in relation to a bank loan) Secondly when a company’s in trouble HMRC has in the past been (until Darling told them to lay off until after the election so that bankruptcies would spike under the new government) the most litigious creditor, frequently pushing them over the edge into insolvency. Unpaid corporation tax is rarely significant: mostly VAT and PAYE/NI which are due whether or not the company is making any profits.

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