What are the rules on HMRC naming and shaming those who owe tax?

HMRC’s controversial tactic of publishing a list of tax dodgers’ details has outed 77 individuals and businesses this year. How exactly did they make the list?

HMRC’s list of people who dodge thousands of pounds of tax – and subsequently try to cover it up – could soon be bombarded with names as more people reach the £25,000 mark.

Only people who have evaded more than this sum since 2010 are included in the list, which names individuals and businesses guilty of deliberately dodging tax.

In some cases, evaders tried to keep millions of pounds due to the public purse. This scrap metal dealer from South Yorkshire, for example, evaded almost £5 million in the past two years.

Culprits have included a hairdresser, fish and chip shop, farmer and kitchen fitter – so how exactly did such “ordinary” people get to be named and shamed by HMRC?

What do you have to do to be published?

In short, you must “deliberately” evade £25,000 or more to be outed by the taxman.

However, the meaning of “deliberate” can be subjective.

According to HMRC, this is someone who knowingly gets their tax affairs wrong. “If a person does not take reasonable care to get their tax right, or does not have a reasonable excuse, they can be penalised.”

Mike Down, tax investigator at Baker Tilly, explains: “Only the taxpayer really knows if their evasion was deliberate or not.

“Some cases are easier to determine because there may be a false document that has been created.”

Other cases are more complicated, however. “HMRC will look at how much the suspect helped during an investigation, how much they told the Revenue in putting things right,” he said.

Even a “deliberate” evader can keep their identity a secret by voluntarily disclosing their unpaid tax to HMRC or cooperating during an inquiry.

Psychological tricks to scare evaders

The damning list is part of HMRC’s behavioural “nudge” tactic – as reported here – that uses psychology to encourage people pay their tax on time.

HMRC promises a lower penalty and anonymity to people who disclose their tax dodge early.

Currently, guilty evaders must pay back the tax owed, plus interest, including a penalty of up to 70pc of the tax.

If the taxman finds evidence of good behaviour by the evader, they will be charged on the lower end of the scale.

For example, the £30,550 evasion by Richard and Geraldine Chan on a property purchase in Harrogate incurred a hefty £16,000 penalty.

In a desperate bid to remain anonymous, the couple, who failed to pay stamp duty on their £763,750 home, appealed to the tax tribunal in February 2014.

Mr Chan, a solicitor, argued in a letter to HMRC that he did not deliberately file an inaccurate return. It had stated that the property cost £100,000, meaning no stamp duty would be payable.

In a letter to the Revenue, he argued that publication of his name would have “serious consequences” for his job and “result in his professional body taking steps to strike him off … not to mention the 50 or so members of his staff.”

HMRC said that it took publication very seriously, but that its gravity was outweighed by the benefits. “We hope that this will deter people from becoming deliberate defaulters,” it said.

A 15pc to 30pc penalty applies to evaders who are “careless” rather than “deliberate” in the non-payment of tax.

Do they print a picture or contact details?

No. Evaders’ business or personal names are printed, alongside their address at the time of evasion.

Some people may be contactable through the list, for example if they are still operating under the same business.

HMRC will only picture someone if they are included in the taxman’s most wanted list, a collection of mugshots of Britain’s most notorious tax fugitives.