Serious tax evasion cases up almost a fifth


Jessica Fino

29 May 2018 03:48pm

Serious tax evasion cases up almost a fifth

The number of tax evasion cases investigated by HMRC has risen by 18% over the last year to 3,809

Law firm Pinsent Masons said the increase was led by the information the Revenue received under the Common Reporting Standard (CRS) regarding UK residents with offshore bank accounts.

The increase in serious tax evasion cases – those involving more than £50,000 in tax – also follows political pressure to strengthen its stance towards tax evasion.

In 2015, HMRC was given a target to triple the number of criminal investigations into senior tax crimes by 2020. That same year it reported 2,749 cases.

In the financial year 2015/16 there were 2,972 cases, followed by 3,216 in 2016/17 and 3,809 in 2017/18.

Jason Collins, partner at Pinsent Masons, said the increase in serious tax evasion cases shows that the Revenue’s “rolling crackdown is far from over”.

He added, “HMRC is receiving plenty of political encouragement in this crackdown as it looks to increase prosecutions across the board. Both HMRC’s local offices and its specialist directorates are on the lookout for any transaction out of the ordinary that might lead them to a big-ticket tax evasion case.”

Collins said that governments believe some professionals and banks are still helping clients to be non-compliant.

He explained, “The EU and OECD have set out ‘mandatory disclosure regimes’ to tackle this perceived abuse – meaning professional services firms and banks need to be vigilant that they are not being embroiled in serious non-compliance."

Collins expects to see more prosecutions in the future when the new liability offence comes into place.

The new legislation makes it a criminal offence to not declare offshore income of more than £25,000 and means HMRC does not have to prove intent. The law firm said this makes it “much easier” to secure a criminal conviction.

HMRC is likely to further ramp up its crackdown as it looks to hit its prosecution’s targets. Businesses may also end up in court if their employees have helped others to evade tax, Pinsent Masons warned.

A spokesperson for HMRC said, “Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate. By effectively enforcing the rules HMRC has, since 2010, brought in £53bn that would have otherwise gone unpaid and collected more than £8bn from large businesses in 2016/17 alone.

“We are clear that large companies, like any other taxpayers, must pay the tax that is due and we do not settle for less,” they said.

Pinsent Masons also said on Tuesday that HMRC is increasingly shifting focus on tax inquiries from foreign companies and taking a harsher line at home-based companies.

The law firm found that the Revenue has reduced its investigations into suspected underpaid tax by foreign companies, from 39% five years ago to 34%.

According to data from HMRC, the tax authority has now shifted its focus onto UK businesses, with 66% of its investigations being targeted to these companies, compared to 62% five years ago.

HMRC suspected foreign companies of £8.4bn in tax underpayment in 2017, up 9% from £7.7bn in 2012. Meanwhile, it suspects UK businesses have underpayed £12.1bn, up 36% from £12.1bn in 2012.

Steven Porter, also a partner at the firm, said, “As UK corporates have moved away from buying schemes, HMRC is taking a more aggressive stance in relation to more routine matters to ensure it gets paid what it believes it is owed.

"As it has been difficult for European countries to tax a share of the huge profits of the US owned tech giants under the existing international tax rules, the European Commission and the UK have proposed a new tax on the turnover of digital companies.

"If we get an EU wide digital tax or the UK goes it alone with its own turnover tax on tech companies with large numbers of UK customers, we may well see an increase in the amount of disputed tax which is attributable to foreign companies."

The European Commission has been pushing for a new digital tax. It announced in March this year that an additional 3% tax rate would be applied to companies with total annual worldwide revenues of €750m and EU revenues of €50m. It predicted this would generate an estimated €5bn per year in revenues for EU countries.

via Common Reporting Standard Tax