At Her Majesty’s Pleasure

In the past month, we have seen three press releases from HMRC highlighting the successful prosecution of UK taxpayers for deliberately evading taxes.  Is this a one off or are the chances of a criminal investigation increasing?

In September 2010 the Treasury announced a fivefold increase in criminal investigations following the announcement of the Government’s ‘Spend to Save’ initiative, which allowed HMRC to ‘ring-fence’ over £900 million to target tax evasion.

The principal aim was to target and investigate tax evasion on a civil and criminal basis and deter people from engaging in deliberate tax evasion in the future. 

This approach was supported and reinforced by the Treasury Select Committee report published in March 2012.  One unsurprising recommendation was that HMRC should focus on ensuring people who are not yet on HMRC’s radar are given every opportunity to ‘join the club’; whereas those that decide to remain in the shadow economy should be made aware that there is a real risk that they will face a criminal investigation and if found guilty a custodial sentence and significant fine.

In the past month there have been three successful prosecutions announced by HMRC involving tax evasion and it is clear that HMRC are intent on prosecuting tax evaders: 

  • An HSBC Geneva account holder pleaded guilty to failing to disclose an account with the bank in a civil investigation.  The information that sparked the enquiry came into HMRC’s possession after the UK exchanged information with the French tax authorities.  The information was stolen by a former HSBC employee and there were real doubts that this information was admissible in a UK court.  Nonetheless, HMRC proceeded with the prosecution and the individual pleaded guilty and was fined.
  • A plumber was jailed for 12 months for tax evasion using information obtained through a project targeting plumbers, gas fitters and heating engineers.  The individual had failed to notify HMRC that he was self-employed and the tax estimated to have been lost was £50,000.
  • A couple who had operated a tarmac business and had evaded direct and indirect taxes for 10 years received custodial sentences of between three and half and four years.  The taxes lost totalled approximately £550,000.

HMRC has trained 200 new criminal investigators to ensure that there is sufficient resource available to investigate the cases selected for potential prosecution.  Alongside this, HMRC announced the changes to Code of Practice 9 in January 2012, which is now called the Contractual Disclosure Facility (CDF).  Persons offered CDF have 60 days to either admit or deny deliberate tax evasion and outline the offences committed.  HMRC have made it very clear that if they believe that the person has either not disclosed all the offences they are aware of or that the individual is not cooperating they reserve the right to commence a criminal investigation.  Gone are the days where a person offered Code of Practice 9 could be assured that HMRC were not going to prosecute.

HMRC are constantly requesting information from third parties to assist their investigators to target specific business types and identify areas where tax evasion is more prevalent.  In the current environment any client concerned that their affairs are not up to date would be best advised to take advantage of the facilities available, for example the Liechtenstein Disclosure Facility (LDF) which does provide immunity from prosecution for the offences disclosed.  The risk of a criminal investigation are simply too great and the consequences too dire to take any further risk.

If you have any questions concerning the current disclosure opportunities available to taxpayers or how to regularise the past, please contact TaxDesk on 0845 4900 509 and ask for John Hood or Noel Hankinson.