Archive for the ‘HMRC’ Category

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Democracy. And money.

August 13, 2015

Many years ago – we had a New Labour government at the time, so you can tell it was a geological age ago – there was a requirement in government to “think small first”.  A lot of work was done to embed thinking about the very smallest businesses before governments made changes to regulations, and, in particular, government departments were told in no uncertain terms to think about impacts on small and micro businesses from the businesses’ point of view.

So, no, calling a meeting in London, in office hours, wasn’t going to capture the views of the one-person business in York or Newcastle.  A one person business has to shut down if the one person is travelling to London for a day, and a day spent talking to civil servants is a day spent NOT earning profits.  When we were introducing the CIS scheme for example I made sure we held public meetings outside London and remember being surprised that the people at the meeting in Llandudno weren’t *grateful* that we’d come out of London to talk to them, but *resentful* that we weren’t meeting in Bangor and Wrexham and they’d had to travel what seemed to them unreasonable distances to hear us.

Fast forward through the coalition years and here we are with, yes, VAT MOSS again.  The EU got it wrong.  The UK government got it wrong.  As I have detailed ad nauseam there were impacts on the very smallest businesses from the changes to the VAT place of supply rules for electronic businesses which threaten their entire viability.  A group of micro business owners have been tirelessly campaigning on the issue and have, finally, got the EU to the point where they will at least actually talk to them.

So here’s the thing.  Not only are they taking time out of their own profit-seeking ventures to act on behalf of themselves and others in a similar position.  No, they’re actually having to pay their own travel costs as well.  So there’s a meeting in Dublin where they need to persuade all 28 EU finance ministries of the strength of their case.  They need three grand to get there.  Read Juliet McKenna’s account of the issues here.  And then go to their crowd funding page here and open your wallet, please.

I’d like to address a special plea to the tax profession here.  We’ve failed them.  We’ve failed to take account of these businesses because they’re too small to pay professional fees.  So they haven’t had a voice in the usual “stakeholder” consultation machinery.  No-one in the profession has been arguing their corner, no-one has reminded HMRC of their existence except when they’ve stood up and argued for themselves.  We owe them.  I’m astonished HMRC hasn’t offered them the funds they have (or at least that they used to have) specifically for this kind of stakeholder.  I’m surprised Taxation or Tax Journal haven’t offered them sponsorship.  And I’m disappointed none of the professional firms has offered to give them some help.

So.  Wallets out, please.  They only want three grand.  Renew my faith in the tax profession’s sense of fair play and let’s see them fully funded by lunchtime, shall we???

 

 

 

 

 

UPDATE: Well, I had a late and leisurely lunch today but, YES!  they raised their three grand by the time I came back, so kudos to everyone who contributed.  It turns out, however, that the modest target of three grand only covers some historical costs and the cost of ONE person going to Dublin.  Now, I ask you, would YOUR organisation send only ONE person to lobby the EU?  Would you be happy going on your own to talk to 28 European finance ministries?  Self-evidently they need to be able to send a delegation, so don’t hold back on donating further so that more than one person can go.  As Saint Sir Bob memorably didn’t say, give ’em your ****ing money!

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Accessibility?

July 27, 2015

Don’t mind me; I seem to have reached the Grumpy Old Git stage of my convalescence.  This morning, for example, I thought I would read the Tax Assurance Commissioner’s new Annual Report – I know, I know, but there’s only so many episodes of Bargain Hunt and Time Team you can watch before your brain melts and dribbles out of your ears altogether.

Here it is: on gov.uk of course, on a page of “collections”, where the 2012-13, 2013-14 reports are collected along with the new one, for 2014-15.

Click on any of them, however, and you get the message that “This file may not be suitable for users of assistive technology”.  Now, wait a minute, wasn’t the government’s own website supposed to meet the government’s own standard for accessibility?  Why is the report a PDF document (which is a bugger to get to a reasonable size for comfortable reading) rather than HTML, which – as the government’s own Service Design Manual points out – is a more accessible option:

For written reports, the native format of the web (HTML) should be your default option. PDF can be an excellent display format, but without additional effort it can be inappropriate for users of screenreading software.

A pdf document should only be used where there is “no other option“:

HTML is quicker, easier and more widely usable/accessible than PDF, but where no other option is possible this PDF guidance should be followed.

I’m lucky enough not to require use of specialist software to read this document: I’m just pissed off that the text shows up on my laptop in a font too small for me to read comfortably without a lot of fiddling about, and that it took me a good ten minutes to find the control to increase the magnification.

But I wonder why there are so many HMRC and HMT documents which pop up as PDFs instead of HTLM.  Is there really “no other option”, or is there a default to seeking an easier life and not worrying about it till someone makes a fuss?

Answers on a postcard…

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Here we go again: equality impact assessment

July 17, 2015

The Summer Budget OOTLAR (Overview Of Tax Legislation And Rates) contains 124 pages, including 110 of TIINs (Tax Information and Impact Notes). They are signed off (on page 12) by David Gauke as containing “a reasonable view of the costs, benefits and impacts of the measures”

No, bear with me, it’s important.

Remember 2010, when the Fawcett Society took a judicial review against the coalition’s “Emergency” Budget? Although they were denied permission (mainly, as I understand it, on the grounds that the Budget had been debated by Parliament by the time the judicial review proceedings were launched and, as any law student knows, Parliament trumps judges).  However the Treasury were pretty much caught with their trousers down as regards conducting equality impact assessment of budget measures and promised to do better in future.

One of the “doing better” changes was to include reporting on equality explicitly in the TIINs that accompany any changes.  The equalities impact field in the TIIN is the only guarantee we have that the Minister responsible for making the decision has had the question of the public sector equality duty put before him or her at the moment of decision.

In that light… David Gauke’s view of what is a “reasonable” view of the equality impact doesn’t have a great deal in common with my own, shall we say?

Take for example page 24 of OOTLAR where there is the table of impacts for the changes to personal allowances. In the equalities impact field there are figures showing clearly that there are more lower paid women than men and more higher paid men than women. The public sector duty in the equalities act requires the government to have due regard to the need to eliminate unlawful discrimination, advance equality of opportunity and foster good relations between those who share a protected characteristic and those who don’t. The equalities impact field of the TIIN is the government’s evidence it has done so: on this evidence it has noted the facts of inequality but given no consideration to advancement of opportunity.

Or look at page 27, which has the table of impacts for the reduction in corporation tax.  It is noted that by 2020-21 the change will give away an anticipated £2,475 million.  The equalities impact shows “changes to the CT rates affect corporate entities and therefore do not have equalities impacts” in spite of the fact that this single measure gives away an enormous chunk of the tax base, for an unquantified economic benefit of making the UK “more attractive as a destination to locate business activity.” They can probably get away with this, because the judicial review proceedings held that equality could be considered on a measure by measure basis rather than looking at the Budget as a whole.  But a bit of common sense and political nous might lead us to wonder whether that was a good decision, when consideration of whether a corporate tax cut is a priority over, say, tax credits for those in working poverty is left unaddressed.

Then there are the changes to inheritance tax: “the government has no evidence to suggest that the measure will have any significant adverse equalities impacts”. (p34) This is not the public sector equality duty and does not provide evidence that the government has paid “due regard” to the right issues. Does “due regard” require consideration of what evidence the government doesn’t have, but could reasonably acquire?

The “exploding head” moment for me came when I reached page 118: yes, the idea of HMRC having power of direct recovery from bank accounts is back!  And apparently “will not impact disproportionately on people with any of the legally protected characteristics” – so the government is confident it won’t be trying to take money directly from the bank accounts of people in mental distress or illness, are they?  We have been here before when HMRC thought they would only be using the power around 17,000 times a year and I suggested, well, in that case, why not limit the power so that it can ONLY be used 17,000 times a year?   So that they would have to prioritise the serious cases and not introduce mission creep.  And it would be used to recover debts from individuals, businesses and partnerships, so I suggested a three year trial of the power applying it only to non-natural persons, ie to companies and LLPs and the like, before they let it loose on the rest of us.  I observe that the current proposals are suggested to affect

 11,000 individuals (including self- employed taxpayers) and businesses a year.

And yet (look at the last field of the table of impacts) the power won’t affect small businesses?  I believe someone’s trousers are on fire.

 

 

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Saving £80million

June 9, 2015

The in-year budget review announcement that a further £80million is to be cut from HMRC’s budget may have passed you by. After all, the argument has been made that spending £1 on HMRC staffing brings in £25 or more of unpaid tax  so you would think that the overriding priority of deficit reduction would imply more rather than less spending on tax collection. However if all we are thinking about is costs, well, perhaps all it takes is a little thinking outside of the box.

5 ways to save £80m from HMRC

1. Reinstate 174 paper

When I started my career, tax inspectors did their calculations with pen and paper, not computer. It would cost a few thousand pounds to give every tax inspector a pad of lined “174 paper” – ruled for double entry bookkeeping – and a pencil. And, if you look at the items on this file of April’s spending  it looks as if turning off the “desktop managed serv” – which I take to be the routine desktop “managed services” available on all HMRC computers – could start us off with a few million of savings.

2. Turn off the phones

No-one answers them anyway. Or at least they aren’t meeting (table 3.1) their own “unambitious and inadequate target“. So stop doing something expensive that you’re doing badly. Turn off the phonelines altogether. And while we’re on the subject…

3. Stop answering mail

HMRC is rubbish at acknowledging, tracking, filing and above all answering pieces of post from the public.  They can’t even produce the correspondence in court. So again they should stop doing something expensive when they’re doing it badly. People can just email…

Oh. Well, they can use Googlemail on their…

Oh. Well everyone has an iPad somewhere. The staff can use googlemail on their own computers. Just THINK how much money the department would save!

4. Stop employing staff

No, hear me out. Not all of them, obviously. Just the ones that do customer service work. With no computers to work on, no phones to answer and no post to deal with, why not? Make all the customer service staff redundant and they can set up small businesses that do emailing and online tax returns for pensioners and other computerisation refuseniks for a small fee – to be paid by the customer, obviously. So HMRC won’t need customer service staff AND we’ll gain hundreds of new small businesses, thus boosting the economy!

5. You know, really, with all this self assessment, the system practically runs itself. Give all the remaining staff a year’s unpaid leave & sort out any errors the following year. Savings? £2,267.7 million (“Total net costs” table 3 page 135 here)

Easy! £80 million? Pah! If the government don’t mind how much revenue they collect and only care how much they save, well, as you can see, it’s easy peasy, and £80 million is another unambitious and inadequate target…

 

 

 

 

 

 

[Personal note: I’m off for a spot of surgery tomorrow so I won’t be around for a while.  See you on the flip side!]

[And another update on June 15th: I’m now out of hospital after rather more extensive surgery than originally indicated.  A five day stay rather than two.  Ow!  But progressing in leaps and bounds… well, incremental steps anyway.  God bless the NHS!]

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A new day

May 7, 2015

Well, election day, actually.  I’ve been and voted, and now I’m ready for a marathon night watching the results.  I know, I know, I’m sad like that; and, of course, I’m semi-retired so I don’t have to be anywhere tomorrow so I can sleep in as long as I like.

You would think, in the hiatus between governments, that all would be quiet on the consultation front.  I logged on to gov.uk out of sheer curiosity, thinking it would be interesting to see the consultation page with the counter set to zero.

But no!  There are, in fact, some 62 open consultations listed.  I don’t know about you, but I feel that 62 new laws and regulations would be a reasonable score for an entire parliamentary term, not the number of residual bits of leftover legislation not important enough to wait for the end of purdah.  Can we just STOP making new law and try administering the ones we’ve got for a bit?

Sigh.

Of the 62 open consultations I have no objection to odds and ends of measures like Natural England consulting on restricting access to, for example, Widdybank Fell (which looks very nice, by the way).  The world would still continue turning even if we didn’t have a government, (Belgium managed OK for 541 and then 135 days, after all) and so I suppose there’s no reason to stop the process of consulting.  But I could have lived without seeing a serious consultation into reform of the Government Ombudsman service, a paper on what I suspect is the first salvo in the war of the next BBC licence fee and a call for evidence on creating a secondary market in our bloody pensions sliding quietly out while all our backs are turned to the polling station.

Anyway.

HMRC has five open consultations:

and the Treasury has eight, two of them also on the HMRC list, five which (from a quick look, anyway) aren’t connected with tax, and one which may be of interest: Travel and subsistence review.  But which closes on 1 May 2016 at 11:45pm.

2016? Seriously?  I suspect it should read 2015 and it’s an already closed consultation.

It’s the twenty first century.  Keeping and maintaining an up to date list like this shouldn’t be this hard, surely?

Dear New Government: please get someone to make gov.uk work.  Thanks.

 

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Tax wizards: to arms!

March 30, 2015

I know I have been banging on about the EU VAT place of supply changes for months now, and that the affected traders are too small for the professional tax press to be much interested (because the people whose businesses are being wiped out are too small to need the services of an agent, often).  But, if you ARE a tax wizard, why not have a look at these interviews with affected traders.  Demand your professional association and professional press take an interest.  This is where HMRC’s stakeholder model breaks down, where there IS no stakeholder group for them to engage with until people get annoyed enough to start one from scratch.

Do tax wizards do pro bono work?  Ask your organisations to add their voices to the campaign.

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Apprentices

March 25, 2015

I was on the tv show The Apprentice once.  Only in the background, when the apprentices did an “advertising” challenge and my then-branch of the WI were invited to provide some background Members Of The Public, but still, I was there.

Originally of course the tv show was about finding someone who would work in, and be trained up in, a business.  Now that it’s all about Alan Sugar finding someone in whose business he wants to invest, surely “The Apprentice” is a misnomer?  Surely it should be called something else?  (I rather like “Enter the Dragons”!)

What does the word “apprentice” mean to you?  I always thought it was a sort of official status – part of a continuum which went apprentice -> journeyman -> master.  Someone who is just starting out but learning on the job, who will later become a skilled worker paid a daily rate (“journeyman” from the French “jour” for day).  And who might ultimately produce a “masterpiece” – the equivalent of passing a final exam by producing a piece of work demonstrating sufficient skill to enrol a journeyman as a full member into a guild and allow them to take on apprentices of their own.

Well yes, I realise we don’t actually live in the middle ages any more, and the guild system is about as relevant to trade as Friendly Societies are to insurance, but I did, in the not TOO distant past, teach apprentices at a further eduction college.  There were building and hairdressing and motor trade apprentices who worked at their trades most of the time but were sent to the college on “day release” for one or two days a week for the formal part of their training.  No, I didn’t teach a trade: I was employed as a lecturer in drama and communication skills so I taught “communications”.  And, trust me, teaching a 6pm class of motor mechanics who can go to the pub once they’ve finished their communications skills lesson is an, er, interesting experience.  Rumour has it the person who drew the short straw in a previous year was tied to a chair and put in a cupboard so I consider I did reasonably well to have survived an entire term without a nervous breakdown.

However.

To get back to my point, I do not think apprentice means what the government thinks it means.  Look at this, an important piece of research by Lorna Unwin and Alison Fuller at UCL, a fact check of Vince Cable’s claim that the government has created 2.1m apprenticeships.  There is a sense in which it’s true: 2.1 million people have been registered as starting apprenticeships, but there’s no way of telling if that represents 2.1 million people starting new positions or whether some (many?  How many?) are existing jobs being converted into “apprenticeships” by the addition of external training.

Their apprenticeship will have involved having their existing skills accredited plus tuition to pass the “Functional Skills” tests in maths, English and information and communications technology. Some will have developed new skills, but government doesn’t check this.

Survey data suggests that the “conversion rate” in some sectors such as health and social care, where older apprentices dominate, is as high as 90%.

Older apprentices?  Yes, if you read the article in full, you’ll learn the – to me, at any rate – staggering fact that “we have around 3,000 apprentices aged 60 and over.” (The statistical sources for the article can be found here).

Coincidentally, the same day that I saw this article I followed some links on an entirely different topic and, in that tangential way that you proceed on the internet, found myself boggled again.  I tweeted this:

Yes, HMRC are recruiting 200 extra customer service operatives (presumably to staff their telephone helplines) and – because they will be trained to an externally recognised standard – are, entirely legitimately it seems, calling the jobs apprenticeships.

you-keep-using-that-word

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Tiresomeness

February 19, 2015

You know what?  There’s too much legislation.  Not just tax legislation, all legislation.  No-one has time to read it all, yet we are all presumed to know and understand it, because ignorance of the law is no defence.  And if you have been watching the programme about what goes on Inside the Commons you will have seen why.  Who has the time, in amongst the running down corridors to be shepherded into the right lobby to vote and camping out in empty offices to get to the front of the queue for a Private Member’s Bill slot (have these people never heard of computers?)

Parliamentary scrutiny is supposed to be the way that Bills are turned into Acts of Parliament – a series of formal debates take place with select committee scrutiny in between and so anything that comes out of the process has been scrutinised by our elected representatives and that’s democracy, right?

Yeah, right.

Parliament isn’t fit for purpose, or at least not for THAT purpose.  The House of Commons is a generator of heat, not light.  Even the way the building is designed confirms it, with two sides sitting opposite each other at a distance calculated to prevent them *sticking each other with swords*.

Which is why the process is vital.  By the time the Bill gets to the floor of the House, all the democratic scrutiny should already have been facilitated.  If it is a regulation, then there should be an impact assessment to show what the proposed change will cost and why the particular option has been chosen.  There should have been a public consultation where all the unintended consequences were bottomed out.  There should be an explanatory memorandum showing what the regulation is intended to achieve and assuring Parliament that all the necessary processes have been followed (there’s a good explanation of what ought to be in the EM at paragraphs 18 onwards here, in the House of Lords Secondary Legislation Scrutiny Committee’s guidance:

The purpose of the EM is to provide members of Parliament with a plain English, free-standing, explanation of the effects of the instrument and why it is necessary)

So consultation is important.  Oliver Letwin told the Legislation Scrutiny Committee that debates in parliament were the bedrock of democracy (so it didn’t really matter if he cut the time allowed for consultation, because consultation wasn’t the place to gather public “views”)  But I disagree.  I think democracy is, perhaps not quite broken, but a bit battered and bent round the edges, and that a consultation process before changes get as far as the Commons is a good sticking plaster.

Which is why it pisses me off that, three years after I suggested it to the Legislation Scrutiny Committee and they made it one of their recommendations, you still can’t get a list of consultations ordered in the date they will close.

I mean, it’s not rocket science, is it?

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Small firms impact: not waving but drowning [Part 3 of 4]

February 18, 2015

We have finally reached page A113 of the TIIN, the second half of the table of impacts.  In terms of the seven questions, we are now past “what does it cost/raise” to the final three questions which are:

  • What will it cost the customer?
  • What will it cost the department?
  • Are there any other impacts?

“What will it cost the customer” can be a bit hard to fathom if you aren’t used to dealing with TIINs, but start with the section on “impact on individuals and households”.  In this case, you could summarise it as:

  1. Individuals who buy ebooks from abroad will have to pay UK VAT on them
  2. There won’t be any compliance costs

Now, if you are an individual with a kitchen table business affected by this change you might object to this, but  “individuals and households” in this context means “customers” rather than suppliers.  The impact on one-woman businesses is covered in the business impact section, further down.

So all of us who buy ebooks – or music downloads, or pdf knitting patterns or any of the other things covered by VATMOSS – will feel the impact because the things we buy will have VAT charged on them at the 20% UK rate and not at, for example, the Luxembourg rate of 3%.  But the total amount of that VAT is captured in the “exchequer effect” field I looked at in part 2: the “impact on individuals” field is for any extra compliance costs the individual might incur.  And of course when you buy an ebook you don’t, as a customer, have to DO anything to pay the VAT at the right rate.  It’s up to the seller to work out the correct rate, charge it, collect it, and hand it over to the tax authorities.

(One of the interesting things about this whole mess has been the lack of any particular interest from small vendors in other European countries.  The rates of VAT are here, on page 3 of this EU document.  The interesting bit isn’t the main rate.  It’s the table of reduced rates on page 4.  Books are zero rated in the UK, and so it feels annoying to us that ebooks aren’t zero rated but charged VAT at 20%.  But look at other countries.  There are very few zero rated items, but many countries charge a reduced rate of VAT on books… so if you’re charging 3, 4 or 5% VAT on books already, why not charge 3, 4 or 5% on ebooks too, to harmonise your rates?  Maybe they should just cut the VAT rate on ebooks all round???  As I understand it, you can keep your zero rates but you can’t increase their scope or number.  So we haven’t asked for a lower VAT rate on ebooks in the UK because we have a zero rate on hard copy books and we’re afraid that the EU would insist on changing that if we changed the rate on ebooks.  Would it be worth paying say 5% VAT on all books to harmonise the rate between hard copy and ebooks?  I genuinely don’t know.)

The main thing to note in this section of the TIIN, though, is the “impact on business including civil society organisations” (in other words, the impact on businesses and charities)

Here we have the lovely suggestion that there are only five thousand businesses who will really lose out by the changes.

This is on the assumption that most small businesses will sell their electronic wares via Amazon or another big platform.  I already have an outstanding Freedom of Information Act review request asking whether HMRC really can get away with not telling us who they consulted in arriving at their decisions on this issue.  But I was always taught that the data used in calculating an impact assessment were subject to disclosure under FoI and I wonder whether it would be interesting to look at just how, exactly, the figures of “up to 34,000 businesses, of which about 5000 are not currently registered for VAT”  were arrived at, because from the face of the TIIN it looks as if they have been plucked from the air.

The estimated compliance cost for these businesses is £40 per business per year for the businesses already registered for VAT and £220 per business per year for the estimated 5000 unregistered businesses which HMRC thought would have to join MOSS.  Again, that’s not the cost of the VAT itself, just the cost of administering the tax – the time cost of filling in the VAT returns.  Even on these figures, 29,000 x £40 plus 5000 x £220 (£1,160,000 + £1,100,000) you get an increase in admin burden just on the very small businesses of around two and a half million a year.  The question the TIIN raises in my mind is, does the £300m putative tax raised from the large businesses like Amazon warrant imposing the £1.5m putative admin burden on micro businesses?

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Prosecuting tax evasion is hard. Because, evidence.

February 14, 2015

Prosecuting tax evasion is hard.  Or at least, I imagine it is.  Because in all my time in the Inland Revenue and HMRC, I was never involved in a prosecution case.

Prosecutions are dealt with by a separate bit of the department.  Because, evidence.

Say I looked at a set of accounts and asked for some backing documents and then someone sent me a document that was a forgery.  Should they have been prosecuted?

Say it was an appeal: say they told me they’d appealed.  Say the thing they sent me was backdated to make it look like they’d appealed in time, and I spotted it was a forgery – could prove it was a forgery, in fact, because it referred to a thing that hadn’t happened at the purported date of the document.  Should they have been prosecuted?

What would their defence have been?  We actually did send in the appeal on time, but we couldn’t put our hands on it when you asked us?  A junior member of staff made a copy from our computer files but obviously they shouldn’t have done it and we’re very sorry, but that doesn’t alter the fact that we made the appeal in time and the dog ate our copy and why can’t you find YOUR copy, HMRC?  Is your filing system SO chaotic?

Say failing to make the appeal on time would have cost them £100.  Should they have been prosecuted for a measly hundred quid?  Would that have been worth the cost of prosecution in the first place?

Would the forged document even have been admissible as evidence?  We hadn’t had any conversations under PACE, they hadn’t had legal advice when they spoke to me, I hadn’t had any training in PACE except for the basic “this thing exists, you have to get it right, so refer to prosecutions if you think you’ve found something that needs this kind of handling” training.

It’s not as easy as it first sounds… except….

Well, except that obviously an overworked prosecution section has to prioritise.  Say they are so under resourced they can only take cases where there’s a million quid of tax at stake: would you even waste their time asking them about a forged document that £100 hangs on?

What should have happened, in an ideal world?

Well, shouldn’t there have been a prosecution unit attached to every team?  Resourced to investigate the smaller cases, under PACE, with a view to prosecution?  To prosecuting the tax cheats (and I mean the direct tax cheats, not the fag smugglers and VAT dodgers on the “most wanted” list) with the same kind of limits as the benefit cheats?

Instead of me arguing with them about their accounts and a district inspector shouting at them about the attempted forgery, maybe their accounts should have been examined with a view to prosecution and they should have been hauled in and interviewed under PACE.  It still might not have been a serious enough case to be worth prosecuting, but there’s a space between a hundred quid and a million where, surely, there ought to be some equivalence between the limits we set on benefit fraud and the ones we set on tax fraud?

Wouldn’t that bring in 25 times more than it would cost to run?  Why aren’t we doing that?

[Edited 14/2/15 because the headline should have read “evasion”, not “avoidance”.  Thank you, twitter! *beats head on desk*]