The taxman is getting more aggressive – so what should you do?

Tax: the price we pay for living in a civilised society? Or, as Peter Hitchens puts it in The Mail on Sunday, the “price we pay for handing over too many of our responsibilities to the state”? The answer is that it should be mostly the first, but that in much of the West, it is fast becoming the second.

It is also hard to argue with Hitchens’ insistence that the “current frenzy against tax avoidance is churned up by a government that cannot control its borrowing and so is frantic to grab all the money it can get”.

Like it or not, tax rates are high and set to stay that way. The state is set to spend even more time and resources on making sure everyone pays up. That’s why the likes of Gary Barlow find themselves in trouble.

But it isn’t just the super-rich who are feeling the long arms of tax investigations. The number of inquiries HMRC makes of those it believes are not paying enough has doubled in the last two years (to 237,000 last year), says The Daily Telegraph. The revenue raised from this is a “huge £20.7bn”.

Special task forces target groups such as buy-to-let landlords and freelancers who have set up as companies. The use of bailiffs and debt collectors has doubled. HMRC is now demanding the right to withdraw money directly from the bank accounts or individual savings accounts of those it thinks owe the state money (without a court order).

It is also putting in place “more aggressive levels of penalty”, to bully individuals into paying up fast rather than challenging bills.

Reducing the risk of being affected should be straightforward. File your tax return on time and accurately. Pay money owed on time. Keep good records of the numbers you entered into your returns and why. Avoid aggressive tax-avoidance schemes (no film investment vehicles). Don’t set up a personal services firm and channel your income through it if you are effectively an employee (HMRC is cracking down on this). Finally, employ an accountant to make sure all this happens as it should.

But what if you do get challenged? If you get a demand you don’t agree with, says Kyle Caldwell in The Daily Telegraph, write to HMRC immediately to say so. They will ask for various documents as proof. Send those (but no more).

If HMRC doesn’t give in and you don’t want to either, you can book a tribunal date (it won’t happen for a while – there were 27,000 waiting in 2012-13) or go to the independent Adjudicator’s Office (0300-057 1111). Then hope the whole thing doesn’t go on for too long.

While you wait, write a letter to your MP demanding a simple – low but unavoidable – flat tax across the UK. As a letter to The Times this week noted, tax complexity and unfairness is an obvious driver of avoidance and evasion.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Going bust

What happens when countries default?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Vote in the MoneyWeek Readers' Choice Awards

Vote for your favourite financial services companies in the inaugural MoneyWeek Awards, and you could win a year's subscription to MoneyWeek magazine. Find out more and vote here.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.