Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
Widespread bogus company registrations for fraud demand attention; new Companies House powers may improve protection.
Conclusion
HMRC highlighted a more widespread problem with bogus registrations, where companies hijack taxpayers’ identities in an attempt to defraud HMRC.35 We have received written evidence on the time it takes for HMRC to resolve these cases and the distress this causes to those concerned.36 HMRC told us that Companies House has recently acquired new powers that will allow it to challenge information before it goes on its register as well as remove information. HMRC said that these changes will allow the entire system to better protect citizens from this type of fraud.37 30 HMRCSR004 Borderfree Trade Limited 31 Q 19 32 Q 19 33 Qq 16–17 34 Q 19 35 Q 18 36 HMRCSR0012 Hillier Hopkins LLP 37 Q 18 12 HMRC performance in 2022–23 2 Managing error and fraud, compliance and tax avoidance Off-payroll working
Government Response Summary
The government agrees with the committee's observation and states the recommendation is implemented. HMRC commits to immediate action on misdirected letters and preventing fraudulent registrations, and is working closely with Companies House to implement the Economic Crime and Corporate Transparency Act 2023, which will strengthen controls for company registration and improve data accuracy.
Government Response
Accepted
HM Government
Accepted
3.5 The government agrees with the Committee’s recommendation. Recommendation implemented 3.6 HMRC recognises the distress that misdirected letters can generate and will take immediate action to correct this when identified. The department would only use its enforcement powers against the taxpaying entity and would not pursue the true owner of the address in the case of a bogus registration. In addition, where the use of someone else’s address to register for VAT is identified, the department will act to de-register/prevent registration if there is a suspicion of fraud. 3.7 For Corporation Tax, registration automatically flows through from Companies House registration data. If HMRC is aware that an incorrect address has been used, it will take steps to prevent the automatic production of correspondence to that address. The department may also notify the true owner of the address where it is possible to do so. 3.8 In 2023, there were circa 67,000 new companies registered with Companies House each month. Most companies initially register with Companies House, where the Registrar will verify the application. Most Corporation Tax records are automatically set up using a data feed from that process. Companies which also register for VAT do so directly with the department and are subjected to further identity validation/eligibility checks. An average of 18,000 companies a month applied for VAT registration in 2023. 3.9 HMRC is working closely with Companies House to support implementation of the Economic Crime and Corporate Transparency Act 2023. This will consider ways of strengthening controls for registration of a new company and improving the processes through which company accounts are filed, as well as opportunities for greater intelligence sharing and reviewing accuracy of current data held on the Companies House Register.