UK sets sights on large-scale tax dodgers
The UK is preparing to triple the number of prosecutions of “serious and complex” tax evaders using an arsenal of proposed new powers, reports the Financial Times.
A unit combining the civil and criminal investigations teams at HM Revenue & Customs will spearhead a crackdown that George Osborne, the chancellor, says will increase tax revenue by £7.2bn.
However, lawyers and former officials warn that the push for more prosecutions might prompt the taxman to focus on soft targets, rather than the high-fliers, with expensive legal teams, whose readiness to dodge tax has stoked public anger in an age of austerity.
The Office for Budget Responsibility has also already raised doubts about the extent to which planned new tax measures revealed in the Summer Budget — including the prosecutions target — will help the chancellor close the deficit.
The prosecutions target and new powers follow a series of controversies that has left HMRC struggling to shake the impression that, while it comes down hard on benefit fraud and cash-in-hand traders, the wealthy and multinationals enjoy generous treatment.
Under the “light-touch” approach to regulation introduced by Tony Blair’s Labour government, HMRC adopted a “collaborative” approach to dealing with big business and the rich, and drew criticism that senior officials were too close to multinationals and their tax advisers.
During the last parliament Margaret Hodge turned the Commons public accounts committee, which she then chaired until May’s election, into an uncomfortable arena for top taxmen. She poured scorn on “sweetheart” deals with Vodafone and Goldman Sachs, and HMRC’s failure to prosecute all but one of the thousands of offshore account-holders named in leaked data from HSBC’s Swiss bank.
“For the first time in my career, they are looking at the kind of people that Margaret Hodge, as chair of the PAC, wanted them to go after,” said James Bullock, a senior tax lawyer at Pinsent Masons. “But it remains to be seen how successful these prosecutions will be.”
Failed attempts to secure big-ticket convictions that might deter others from dodging tax, such as the 2012 prosecution of Harry Redknapp, the football manager, have underscored the difficulty of convincing juries that deliberate evasion has taken place. But what one tax official called a “tsunami” of government proposals released since the Budget contains new powers for HMRC.
The proposals include introducing “strict liability” in tax cases. This would mean that claiming evasion had been accidental would be no defence unless there was a “reasonable excuse”. A second is for a charge that could be brought against companies, rather than individual executives or directors, that evade tax, as well as the agents that help them.
A system that allows holders of offshore accounts that contain assets concealed from the tax authority to escape criminal sanctions by coming clean, known as the Liechtenstein Disclosure Facility, is to close at the end of this year. From next year, Guernsey, Jersey and the Isle of Man will start sharing tax details with HMRC. The following year a tax data-sharing system between 94 countries — including the most secretive tax havens — will start to kick in.
For HMRC, the extra information on offshore accounts could be a “game-changer”, Jennie Granger, its head of enforcement, told a gathering of tax advisers and lawyers in July.
However, some tax experts are wary of the target to triple annual prosecutions for the most serious tax evasion to 100 each year at a time when the Crown Prosecution Service and the courts are enduring funding reductions. HMRC itself will receive £800m for the prosecution drive but, along with the rest of Whitehall, faces the prospect of deep cuts under a planned spending review.
