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Sunday, 7 August 2011

police who took tip-off fees to be investigated by taxman

Police officers who allegedly took payments from newspapers and private investigators could face hefty fines and criminal prosecution after it emerged HM Revenue & Customs is reopening personal tax records to check if payments were fully disclosed.

It is understood HMRC has already begun probing self-assessment forms from previous years in the wake of new information obtained amid the phone-hacking revelations.

Last month Sir Paul Stephenson, the outgoing Metropolitan police commissioner, said documents provided by News International appear to include information on "inappropriate payments" to police officers. It was reported that the company provided the Met with details of payments made by the News of the World to senior officers between 2003 and 2007.

Under HMRC rules any payments earned in connection with an individual's employment are required to be disclosed for tax purposes, even if the payment is deemed illegal.

An HMRC spokesperson said he could not confirm the nature or extent of any investigation into a private individual's tax affairs. But he confirmed that HMRC will act on any new information and that illegal earnings can still be liable for tax.

Action to recover tax from police officers paid illegal tip-off fees relies on the precedent set by the "Miss Whiplash" prostitution case of the early 1990s, which has since entered the HMRC rule book. Miss Whiplash, who also went by the name of Lindi St Clair, was pursued for £112,000 in unpaid income tax in the late 1980s. It culminated in a court case in 1990 where she argued that since it was illegal to live on immoral earnings, taxing her would be committing an offence. But she lost the case and was subsequently made bankrupt.

An HMRC spokesman said: "If you receive money in connection with your employment then it is liable for income tax. Illegality is irrelevant."

Over the past year HMRC has intensified investigations into alleged tax cheats and promised to increase the number of prosecutions. Since April HMRC has had powers to name and shame anyone found to have deliberately evaded £25,000 or more in tax. The scheme will see names, addresses and details of the evasion made public. But those who come clean can avoid having their details published.

Earlier this year the government gave HMRC with an additional £900m to fund more investigations into tax evasion. The aim is to raise an additional £7bn in tax each year by 2014/15. HMRC has also gained new powers to inspect taxpayers' records and documents. In a typical investigation it will examine income and earnings dating back six years. If it discovers an individual has knowingly submitted an inaccurate return or document, or taken active steps to conceal earnings, it can demand repayment of the tax, plus interest and a penalty of up to 100% of the unpaid tax.

The department recently announced the targeting of the restaurant industry with a new task force dedicated to detecting tax and national insurance evasion. But it added that criminal prosecutions were reserved only for the most serious cases of high level fraud.

 

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