HM Revenue and Customs will feel the force of Chancellor George Osbourne’s Spending Review after being told that 13,000 of the 69,000 posts currently held will disappear by 2014-2015.
And business owners may in turn feel the full force of HMRC after they were told to crackdown on tax dodgers and recoup £7bn currently being lost through evasion, avoidance and fraud.
So, how are they going to do this if their budgets are being slashed by 15%? Quite simply, whilst money will be saved in cutting administration costs and improved efficiencies, £900m will be set aside to tackle the issue of those “morally indefensible” people who evade tax.
What’s interesting is how they’ve placed ‘avoidance’ alongside ‘evasion.’ It’s an important distinction because evading tax is blatant non-compliance of the UK’s tax laws. Tax avoidance on the other hand is seen by some as a legitimate process of negotiating the tax laws to lower your own tax bill. You could call it ‘financial planning.’
The fact that HMRC is clamping down on tax avoiders is worrying because there is always the risk that legitimate contractors will be needlessly hassled by tax inspectors prying through their accounts. And if anything is slightly awry, you can be sure that HMRC will take any opportunity to rake in a few pounds.
This will make it even more important to keep on top of your accounts.
As Danny Alexander said: “Decisions we make in the Spending Review will ensure the taxman has the resources to be ruthless with those often wealthy people and businesses who think they can treat paying tax as an optional extra.”
Despite this redistribution of resources, some doubt whether it’s enough to counteract the loss of personnel. Can they really successfully crack down on tax evaders with such a heavy loss of staff? Accountancy Age reports that the cuts are likely to lead to strike action with the Public and Commercial Services union saying that strikes are inevitable unless the government backs down over the cuts.
In summary: Many commentators are referring to the wider Spending Review as a massive gamble with no consensus on what the outcome might be (well, this really is uncharted territory!). And it seems that the same applies to cuts at HMRC. Will they become a new lean, mean, tax collecting machine? Or an underpowered, undermanned shambles?