UK: HMRC slammed in report over wealthy tax avoiders

HM Revenue and Customs is failing to prosecute wealthy tax evaders who hide their fortunes in overseas, MPs have warned, reports the Isle of Man Today.

The Commons Public Accounts Committee said HMRC’s record of just 11 prosecutions for offshore tax evasion in the past five years was “woefully inadequate” and offered no credible deterrent to lawbreakers.

In a highly critical report, the committee complained that HMRC continued to refuse to report on the scale of “aggressive tax avoidance” – which meant it was impossible to assess whether the law was working as intended.

It said that customer service levels at HMRC were so bad – with half of all telephone calls to its contact centres going unanswered – it was having an “adverse impact” on the collection of tax revenues.

The MPs said HMRC appeared to have ignored previous warnings by the committee that it needed to show it could deal “robustly” with individuals and firms which deliberately misled it.

The report found that the 11 prosecutions which it had brought in relation to offshore tax evasion since 2010 had resulted in a collective total of just 15 years jail time.

Only one of the cases related to an individual on the “Falciani list” – leaked by a whistleblower at HSBC’s private Swiss bank – which had identified some 3,600 UK individuals who were potentially engaged in tax evasion.

Despite initiating 950 inquiries, HMRC told the committee that it had now “exhausted” its use of the Falciani data which “did not meet the standards required for UK evidence” and it did not expect any further prosecutions.

HMRC has offered “disclosure facilities”, with reduced penalties for individuals who come forward with information about their assets held overseas, but the committee said this was no substitute for the “deterrent effect” of prosecution.

“The number of criminal prosecutions for offshore tax evasion is still woefully inadequate,” the report said.

“HMRC’s investigations do not lead to sufficient prosecutions to provide an effective deterrent, particularly for wealthy individuals who hide their assets offshore.

“The vast majority of UK individuals pay what is due from them in tax. Those who do not must in future know that they could face prosecution if they deliberately seek to evade paying what is due.”

The committee said HMRC’s customer service record – which it had previously described as “abysmal” – had deteriorated further with the number of calls to its contact centres that were actually picked up falling from 72.5 per cent in 2014-15 to 50 per cent in the first half of 2015.

The committee chair, Meg Hillier, said it had now declined to the point where it represented a “genuine threat to tax collection”.

“It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share,” she said.

An HMRC spokesman said: “We are disappointed that the Public Accounts Committee has overlooked HMRC’s record results, which include collecting a record £517 billion in tax revenues and further reducing the UK’s tax gap – the difference between what is due and what is collected – to ensure it remains one of the lowest in the world.

“We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year and we had recruited around 3,000 new staff to improve service levels. But these customer service issues did not affect our ability to collect tax.

“Last year, we secured £26 billion of additional yield across all our compliance work, ensuring everyone pays what they owe.

“Tackling tax evasion is a top priority for HMRC and last year alone we successfully prosecuted a record 1,200 cases, resulting in 407 years of custodial sentences.

“We also routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action.

“We brought in more than £1 billion from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers.”

The PCS union pointed out that 11,000 full-time equivalent posts had been cut by HMRC since 2010.

“It has been abundantly clear for years that the department has cut too many staff and that services are suffering,” general secretary Mark Serwotka said.

“The department needs major investment backed by a real political commitment to tackle tax evasion and avoidance as an alternative to more damaging spending cuts.”