The taxman has written to the most persistent tax evaders in the country telling them they are "on probation", in a crackdown on evasion which will see the worst offenders named and shamed.
HM Revenue & Customs began sending letters to 900 tax evaders notifying them that they are on a hitlist. The latest intervention adds to rules introduced this time last year allowing HMRC to name those guilty of persistent offences.
HMRC will make unannounced visits to the premises of those notified, carry out checks on their suppliers and customers and deny them access to simplified tax-filing procedures and processes for a period of up to five years.
The fresh approach involves using powers HMRC already has, a spokesman said, but will mean the concentration of HMRC's resources on the minority of errant taxpayers, and serve to deter others.
Steve Hickman of HMRC, said: "Tax cheat check-ups will involve continued and close scrutiny – it is a real deterrent. If you are thinking about breaking the rules, just remember you could end up with HMRC on your back for five years."
A spokesman added that the programme amounted to a "probationary period" for tax evaders. HMRC has identified individuals and businesses who have made deliberate errors of more than £5,000.
Critics suggested the initiative left a huge amount of discretion for HMRC to determine what was meant by "deliberate".
Richard Murphy, a critic of tax evasion and avoidance, said he thought the plan was a good idea but poorly executed: He said: "I am quite concerned that the level of error is fairly low at £5,000. People can make honest mistakes."
His concerns were echoed by the Chartered Institute of Taxation. Gary Ashford, chairman of the institute's management of taxes sub-committee, said: "It is right that HMRC come down hard on those who deliberately under-declare tax. However, it is crucial that HMRC gets decisions right on whether errors are deliberate or simply the result of carelessness, and that penalties and other sanctions are proportionate. A £5,000 error for a large corporation is quite small – and could result in a huge amount of additional reporting to HMRC."
The latest moves are this year set to be followed by naming and shaming those who are persistent offenders. In March last year, HMRC was given power to name businesses and individuals who are persistently under-declaring income, putting items offshore and other forms of evasion. Anyone who has deliberately evaded tax of £25,000 or more risks being named from April onwards, when the first tax year to which the new rules apply comes to an end.
The scheme will see people's names, addresses and details of their evasion made public. Those who come clean can avoid having their details published, HMRC said.
Murphy said he would rather see HMRC devote more resources to helping people get their tax affairs right rather than naming and shaming those who get it wrong.
