Government confirms civil and criminal tax investigations following 'Panama Papers' leaks

Out-Law News | 10 Nov 2016 | 9:46 am | 2 min. read

A special taskforce set up following the 'Panama Papers' leaks has opened civil and criminal investigations into suspected tax fraud or financial wrongdoing by more than 30 individuals and companies, the government has announced.

A further 43 people described as high-net worth individuals (HNWIs) have been placed "under special review" while their financial links to Panama are further investigated, while a number of individuals have come forward to pro-actively settle their tax affairs, according to a written update provided to parliament by the chancellor of the exchequer and home secretary.

The taskforce has also identified nine potential "professional enablers" of economic crime, all of whom have links with known criminals; and written to a further 64 firms to establish the extent of their links with the Panamanian law firm Mossack Fonseca, according to the statement. It has also identified "a number of leads" relevant to a major Financial Conduct Authority (FCA) insider trading operation and established links to eight active Serious Fraud Office (SFO) investigations.

The cross-agency taskforce was set up in April 2016, after millions of documents reportedly detailing the use of offshore tax structures in Panama connected to Mossack Fonseca were obtained by the International Consortium of Investigative Journalists (ICIJ). While the ICIJ refused to release all of the documentation to any international tax authority or law enforcement agency, the "important work" of the taskforce was not delayed as a result of this, according to the statement.

In his written statement, chancellor of the exchequer Philip Hammond said that the work of the taskforce had "added greatly to the UK's understanding of the ever-more complex and contrived structures that are being developed to mask offshore tax evasion and economic crime".

"This intelligence will ensure that the UK remains uniquely placed to contribute to the international effort to uncover, and take action, on wrongdoing, regardless of how deeply hidden the arrangements are, as well as identify those jurisdictions where regulatory oversight requires improvement," he said.

Tax expert Fiona Fernie of Pinsent Masons, the law firm behind Out-Law.com, said that the statement provided "further evidence of the new approach to tax avoidance and evasion from HM Revenue and Customs (HMRC)".

"Tax secrecy is increasingly a thing of the past," she said. "In addition, the era of HMRC providing an incentive for taxpayers to come forward voluntarily is also over."

HMRC recently consulted on the introduction of tougher penalties for those who 'fail to correct' historical tax irregularities from their offshore investments and accounts. It recently replaced its voluntary disclosure facilities, which offered special terms to those willing to come forward with such irregularities, with a single Worldwide Disclosure Facility (WDF) offering no such terms.

The government also intends to introduce a new 'strict liability' criminal offence for those UK taxpayers that fail to notify HMRC that they are chargeable to income tax or capital gains tax in respect of offshore income, assets or activities, or that fail to file a return or include such income or gains on a tax return. It recently published legislation that will, once in force, criminalise companies that fail to put in place measures to prevent the facilitation of tax evasion by their employees and representatives.

HMRC was allocated an additional £800 million in funding as part of the 2015 Summer Budget, to be invested in compliance and tax evasion work. It is expected to use this funding to triple the number of criminal investigations that it undertakes into serious and complex tax crime, focusing particularly on wealthy individuals and companies. The target is to recover an additional £7.2 billion in unpaid tax and increase prosecutions to 100 per year by the end of the current parliament.