Why a junior tax inspector may soon be spying on you

Despite Allcock, the Revenue's power is growing, says Graham Ball
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The Independent Online
Junior tax inspectors will soon receive the same sweeping powers as those enjoyed by Michael Allcock, the former head of the Inland Revenue's investigations unit who was jailed last week for five years for corruption.

As leader of a secret group in the Revenue's central London-based Special Office Two, nicknamed the "Ghostbusters" - from slang for millionaires not previously known to the authorities and suspected of hiding their earnings to evade tax - Mr Allcock had draconian search-and-seizure powers. He operated in total secrecy and was answerable only to a few superiors.

Now, the privileges he abused are to be extended to far lower ranking inspectors under the new self-assessment tax system.

From 1 April, district-level inspectors will be able to launch full- scale investigations into an individual's tax affairs without needing permission from their bosses. No reason will have to be given and any appeal against investigation will be dealt with internally by the Revenue. As many as 10,000 of these investigations were likely every year, the Revenue admitted yesterday.

Tax experts are astounded at the Revenue's determination to devolve Mr Allcock's powers, in the face of the embarrassment caused by his conviction. "It is impossible to comprehend, but the powers that Allcock abused are being devolved down," said John Gwyer who spent 23 years in the Revenue and is now a leading independent tax consultant with the firm of Levy Gee. "Ordinary inspectors are going to gain incredible powers, and few of them have any training or expertise in investigative work of this nature."

Designed to save public expenditure on overheads and to take advantage of new computer technology, self-assessment is the most radical overhaul of the tax regime for decades. It will affect all higher-rate taxpayers, company directors, business partnerships, small firms, self-employed workers, or anyone who has investment income not taxed at source.

"My fear is that no proper system of checks and balances has been built into this new system," said Mr Gwyer. "Absolute power corrupts - you only have to look at Mr Allcock for proof of that."

He said he expected the first investigation to begin in the autumn. Then, "grass-roots inspectors will be able to demand that individuals produce details of accounts, private statements, credit-card records, invoices, vouchers, everything".

They can demand to see the past two years' records of personal income and capital gains and six years' business accounts.

Ironically, the director of the new system is Doug Smith, one of Mr Allcock's former bosses. Two of Mr Smith's reports on his superstar inspector and the team he ran were quoted by Mr Allcock's defence at the Old Bailey.

In 1989, Mr Smith wrote: "The group is now functioning well as a unit and promises much for the future. I believe that he [Allcock] has done much to improve the group and give it confidence. My money is therefore on good future results."

The following year he wrote: "There is no doubt that Allcock has enhanced the investigative approach of the group and far more active investigation is taking place than was the case 12 months ago. In doing so, Allcock has developed a much more challenge-based approach to a range of cases to enable time to be freed for real investigation of those taxpayers who choose, for whatever reason, not to disclose. There has been an active use of information powers."

A spokeswoman for the Inland Revenue confirmed that thousands of new taxpayerswould be investigated each year from now on. "It is true that there are additional powers to investigate associated with the new self- assessment programme," she said. "There will be a certain percentage of random investigations for which no prior reason needs to be given. We estimate that about 10,000 of these investigations will be carried out each year.

"However, in our opinion it is unlikely that these will all take the form of full investigations. In some cases the inspector may simply require receipts or greater detail."

The spokeswoman went on to describe how the new self-assessment programme was based on the system used in Australia and New Zealand. Officials from the Inland Revenue have been to Australia to study its system in operation and Australian tax experts have come to Britain to offer advice.

"Taxpayers who have a complaint have many avenues open to explore," she said. "There are a number of steps which go right up via the Adjudicator to the Parliamentary Ombudsman.

"However, if a taxpayer has a dispute over a point of tax law, they can take it up with the General Commissioners who are independent and act in a way similar to magistrates."

But no matter how hard they try, it is unlikely that the newly empowered army of tax inspectors will match Mr Allcock for audacity.

Following the break-in at the Knightsbridge security vaults in 1987, the maverick inspector decided to investigate the customers who claimed to have stashed away precious gems and cash in the safety deposit boxes. While police investigated the robbery, Mr Allcock turned his attention to the victims. More than pounds 850,000 was recouped for the Exchequer.

Later, in another daring stroke, he approached the Kensington and Chelsea council and asked for a list of all its parking-permit holders. "The information we got back was first-rate," said. "Names addresses, phone numbers. All we had to do was look for large and expensive cars, foreign- sounding names and business phone lines listed at home addresses to give us a lead."

Mr Gwyer, who dealt with Mr Allcock, fears that the handing-down of so much power will inevitably increase the risk of abuse.

"Allcock was a bully," he said. "His whole approach was just to throw his weight about and then to try to do a deal. As the wider self-assessment regime is established, the Revenue will have greater powers of investigation and in particular will no longer have to give a reason for mounting an investigation.

"Individuals could find themselves at the centre of a full investigation just because the inspector in question is having a row with their accountant."

Despite complaints about Mr Allcock and his department's buccaneering tactics, nothing was done to curb his excesses for years.

Mr Gwyer said that nothing fundamental had changed at the Revenue since Mr Allcock was suspended in 1992.

"The whole of the Revenue's management ethos, its structure and its practical impact needs to be reviewed," he said. "The potential for erosion of individual liberty is great and there is no written constitution or Bill of Rights to protect the taxpayer. If people are not to be unfairly targeted and pursued, the Revenue should be compelled to give good reason for its enquiries."

In future, taxpayers face a pounds 100 fine for making a late return plus another pounds 100 if the return is six months or more overdue. After that, they can be fined at the rate of pounds 60 a day.

Taxpayers who do their own tax will have until 31 January next year to file a return and a cheque for their estimated bill.

Late payers face a 5 per cent fine for being 28 days late and an additional 5 per cent if they fall six months behind with their payments.

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