Exclusive: Sharp drop in fines against finance directors as HMRC has ‘bigger fish to fry’
The number of penalties issued personally to finance directors at large businesses by HMRC has dropped from 148 to just 20 in a year, according to new data, shared with City PM today.
Law firm Pinsent Masons said that much of the fall in the number of fines against finance directors is due to HMRC having to shift the focus of their investigations away from tax disputes with big businesses to investigating furlough fraud.
In October, the National Audit Office said that up to £3.9bn may have been illegally accessed by criminal gangs and employers through the furlough scheme.
HMRC has been tasked with investigating this fraud and as a result has shifted many of its tax investigators to this work.
HMRC has also been taking a more selective approach to fining finance directors.
For example, HMRC will now consider waiving a fine for technical breach of the tax accounting rules if HMRC is comfortable that no actual tax is owed.
Back to normal?
“The investigations into furlough fraud mean HMRC has bigger fish to fry but that will change. As more furlough fraud cases are closed and the lockdown finally ends we would expect compliance work focused on big businesses to increase,” said Pinsent Masons’ partner Jake Landman.
“HMRC is tasked to bring in as much under paid tax as possible and it still sees large corporates as a major source of extra revenue,” Landman told City PM
“Some finance directors have felt that being personally fined for a breach of the tax rules they didn’t know about is unfair. However, HMRC see it is way of forcing finance directors to take more personal responsibility for tax compliance,” he added.
“When this regime was designed it was decided that a fine levied against an individual director can act as more of a deterrent than simply fining the overall business,” Landman concluded.