Fury at the great dodgers’ getaway: Amnesty means just ONE man was charged from HSBC files – and he will be the last

Public fury over tax dodging by some clients of HSBC’s Swiss arm is set to escalate after sources close to the Revenue’s investigation said there would be no more prosecutions for tax evasion.

Despite Revenue and Customs being handed details of 6,000 Swiss bank accounts held by UK residents and identifying more than 1,000 where tax evasion appeared to have taken place, just one individual has been prosecuted.

And while the taxman says it is investigating another 150 cases, insiders said they were merely complex rather than criminal matters, meaning there is hardly any chance of further prosecutions.

The news comes after a fraught week for the Revenue, in which it was hauled over the coals by MPs for failing to bring tax dodgers to book. Yesterday Ed Miliband said a Labour Government would launch a full review of culture and practices at HMRC in the wake of recent revelations.

But it has also emerged that the vast majority of possible offenders escaped thanks to a tax amnesty put in place by the last Labour government. At least 500 people dodged the courts by using the amnesty set up amid much fanfare by then Chancellor Alistair Darling in 2009.

Darling introduced the Liechtenstein Disclosure Facility (LDF) – a deal that enabled anyone with an offshore account to make a full confession to the UK authorities. In return, unpaid tax only had to be paid for the previous ten years. Penalties were capped and those using the LDF were given immunity from prosecution.

Launched initially to cover tax dodgers with cash in the tiny Alpine principality of Liechtenstein, in practice the scheme allowed tax evaders with money anywhere in the world to enjoy the amnesty.

All they had to do was open an account in Liechtenstein (if they did not have one already), and all their offshore tax dodging could be included in a settlement, even without them transferring money to the Liechtenstein account.

Lin Homer, head of the Revenue, admitted that when it received the names of 1,100 people with Swiss HSBC accounts, tax officials advised many to use the LDF, and about 500 did. The average payment to settle longstanding tax bills was £173,000, but in 14 cases taxpayers paid more than £5million each.

A Labour spokesman said this use of the LDF had never been its intention.

‘Under the Liechtenstein Disclosure Facility people are only entitled to non-prosecution where they make full and ‘unprompted’ disclosures. This is clearly not the case with the HSBC files, which were leaked and given to HMRC in 2010. Ministers need to explain why only one person out of 1,100 was prosecuted from the information they were given.’

The revelation led to fury from the Revenue’s critics, including accountant-turned-campaigner Richard Murphy, who asked: ‘Is it the job of the Revenue to help tax evaders mitigate their risk of tax penalties?’
Defenders of the policy insist it made sense, as the difficulty of securing prosecutions showed. Jason Collins, at law firm Pinsent Masons, said: ‘The Revenue could have gone down the prosecution route, but it wanted the money, and it wanted banking secrecy to be whittled away with people voluntarily regularising their position.’
TINY LIECHTENSTEIN USHERED IN A NEW ERA
Liechtenstein may appear to have little to do with the taxman’s probe of clients of the Swiss branch of HSBC.
The Alpine state covers just 62 square miles and has a population of 35,000, led by Prince Alois in Castle Vaduz. But a deal with the UK unlocked the secrecy around Swiss banking, by giving tax dodgers a clean start.
In an echo of events at HSBC, it was a leak of data from a Liechtensteinian bank in 2008 that led to the so-called Liechtenstein Disclosure Facility.
UK citizens with accounts in the tiny principality were offered a deal. They would not be prosecuted, and could limit their fines, if they revealed in full their offshore affairs. The deal was so good that many with Swiss accounts opened accounts in Liechtenstein, then made a full declaration regarding their Swiss deposits to gain immunity.

The LDF raised about £1billion in unpaid taxes with 4,000 individuals taking part. A similar deal in Switzerland raised a further £1billion.

Collins added: ‘The HSBC data was incomplete. There’s a lot of cost and effort in getting you to spill the beans.’

The debacle is a far cry from the excitement at the Revenue when the data – leaked by former HSBC employee Herve Falciani – came into British hands.

Quizzed by the Treasury Select Committee in 2011, the Revenue’s then boss Dave Hartnett could barely contain his excitement.

The 6,000 accounts were, he told the Treasury Select Committee, ‘all ripe for investigation’, adding: ‘We have hundreds under investigation, some under criminal investigation, and are about to challenge another 800. Then we will industrialise the process, challenging 1,000 at a time.’

In the end the 6,000 accounts were found to be linked to just 3,500 individuals. Of these almost 2,500 were found not to have broken any rules, leaving just 1,100 potential targets.

Four years on, critics are calling the taxman’s performance ‘pathetic’, with just one prosecution and £135million recovered through the HSBC list. Critics say countries that received similar caches of data from the same leak raked in much more. With half the number of names to investigate, the French tax authorities are said to have recovered £200million from their list.

Attention has now turned to whether other criminal activity such as money laundering can be proven.

That leaves the Coalition and Labour appearing to give tax evaders an easy ride. MPs on two committees – the Treasury Select Committee and Public Accounts Committee – will in the coming weeks seek to determine if the decisions made, pragmatic or otherwise, were the right ones.