Managing Deliberate Defaulters

After conducting a series of campaigns to encourage the disclosure of undeclared income or gains abroad, HMRC has introduced new measures to clamp down on tax evasion. Changes include increased levels of scrutiny and harsher penalties for those who deliberately evade tax.

Under the Managing Deliberate Defaulters (MDD) programme, individuals who deliberately evade tax will now be subject to detailed inspection for up to five years. The level and term of monitoring will depend on the seriousness of the offence, but HMRC does not envisage that anyone will be released from the scheme within two years.

There are a variety of ways that HMRC can now monitor a deliberate defaulter's tax affairs. These may include:

• making announced or unannounced inspection visits to carry out pre-return checks of their books and records
• asking for certain records and additional information to be sent in with the individual's tax return
• conducting in-depth compliance checks into all or any part of the person's tax affairs
• observing and recording the person's business activities and cross-checking details in their accounts
• requiring more frequent VAT returns or withdrawing certain favourable VAT schemes such as cash accounting, annual accounting, the flat-rate scheme and retail schemes.

If HMRC finds that a person has continued to deliberately evade tax, it may instigate criminal proceedings against that person. From April 2010 where someone has deliberately evaded tax of more than £25,000 HMRC can also publish the person's name and other details.


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