As part of the UK government’s support to the economy in 2020 in response to the pandemic, exceptionally HMRC have been making payments to taxpayers rather than collecting tax payments from taxpayers. Clearly, this cannot continue indefinitely.
What activities can we expect from HMRC in 2021?
It is unlikely that matters will change overnight. No doubt HMRC will want to tread carefully in any of its forthcoming activities so that they cannot be taken to task by the media – not forgetting the taxpayer!
But that doesn’t mean to say that HMRC will be doing nothing. HMRC have already issued another round of “nudge letters” following up on the Loan Charge dated 22 December 2020. Merry Christmas HMRC!
HMRC has paused a number of investigations and have also granted extended time limits where appropriate. Indeed appeals have been extended from the normal 30 day time limit to 90 days.
I suspect HMRC will take stock on their strategy on both existing and new investigations. However, HMRC will have to bear in mind time limits for doing so.
Which taxpayers will be targeted in 2021?
There will always be some taxpayers that have already committed tax fraud to which HMRC will mount a robust challenges in 2021. Some will be on a criminal basis (arrests have already been made on the Furlough scheme) and on a civil basis (specifically new CDF cases).
Similarly, there will also be some taxpayers still seeking to minimise their exposure to UK taxation as well as those taxpayers who still remain undetected. HMRC will no doubt continue with tax avoidance strategy (Loan Charge follow up etc.).
And then we have the unending flow of information into HMRC under the Common Reporting Standard and other “well wishers” closer to home (former spouses, disgruntled employees, neighbours etc,). Whilst some of this information will be in relation to new matters that may trigger a challenge by HMRC, it may simply clarify the facts or HMRC’s suspicions on older matters. Either way, 2021 could be a time for turning the tide by HMRC.
The final category of taxpayer to consider are those who realise that they may be a target in 2021 because of a need to regularise their past tax compliance in the UK. 2021 could be the year for those taxpayers to make a Disclosure to HMRC, Voluntary or otherwise.
A New Year, a new strategy?
I do not anticipate a new strategy being implemented by HMRC but there may well be a tightening up all round by HMRC being less forgiving whilst still acting within the tax legislation.
That said, in the past HMRC has launched a number of “tax amnesties” such as the Liechtenstein Disclosure Facility (LDF) and various campaigns such as the Let Property Campaign. Might these be expanded in 2021 in order to encourage compliance and bring on tax revenues more quickly?