Number of criminal prosecutions for tax evasion jumps by almost a third in a year
The number of criminal prosecutions for tax evasion has surged by 29% to 795 in 2013/14 up from 617 in 2012/13, as HMRC steps up its efforts to close the UK’s £35bn tax gap, according to Thomson Reuters legal business, the world’s leading source of intelligent information for businesses and professionals.
HMRC has set a target of 1165 prosecutions in 2014/15, meaning that prosecutions will have to jump by almost 50% in just one year to meet that target.
Thomson Reuters says that HMRC’s increased focus on prosecuting tax evaders has been reinforced by the upcoming introduction of a new criminal offence for taxpayers who fail to declare offshore income or gains.
Under plans announced in August, HMRC will only need to show that the money held offshore was taxable and undeclared, unlike the current regulations whereby HMRC must prove someone holding undeclared offshore income had intended to evade tax.
Emma Nendick, head of tax at the Practical Law service, and a part of Thomson Reuters, said: “HMRC has got suspected tax evaders firmly in its sights, taking more and more cases to the criminal courts in an effort to clampdown on this area.
“Criminal records and prison sentences are not just an idle threat. In fact the increasing volume of criminal prosecutions is one of the measures by which HMRC now judges its success.
“Whilst public attention has recently been focused on tax planning by corporates and High-Net-Worths the legal profession is seeing a marked increase in criminal cases.
“For HMRC, criminal prosecutions have a useful deterrent effect even on those areas of tax avoidance that are very clearly outside of the criminal courts.”
Emma points out that what may be a civil investigation, that is, enquiring into possible tax avoidance can turn into a criminal prosecution if:
– materially false statements are made or materially false documents are provided in the course of a civil investigation
– deliberate concealment, deception, conspiracy or corruption is suspected
Criminal and civil tax litigation work seen as an area of increasing activity for law firms
Thomson Reuters says that HMRC’s increase in prosecution targets and investigations into tax planning schemes means law firms are seeing contentious tax work as an increasingly significant area of activity.
Thomson Reuters explains that law firms are competing with accountancy firms for tax investigation work but may be at an advantage because their advice is protected by legal professional privilege, which enables clients to be open and frank with their lawyer in order to receive the most appropriate legal advice without the fear of that advice being disclosed to HMRC.
Emma continued: “Legal privilege effectively means that if taxpayers want confidential tax advice on how to resolve tax issues, they may feel more comfortable going to a lawyer.”
