Out-Law News 1 min. read

HMRC plans to crack down on tax evasion as criminal cases rise by 49%

Any UK taxpayer that has unpaid tax should take professional advice to try to avoid HM Revenue and Customs (HMRC) pursuing a criminal investigation amid a rise in cases, an expert has said.

The number of criminal cases brought for tax fraud in the UK increased by 49% in the last year. A total of 94 proceedings were brought in 2022/23, compared to 63 in 2021/22, according to Pinsent Masons research.

Steven Porter, tax law expert at Pinsent Masons, said: “Criminal charges are the most powerful weapon in HMRC’s arsenal and they’re a weapon that it’s now using much more often. The threat of a prison sentence has a strong deterrent factor to it. The rise demonstrates that it is cracking down hard on the most serious forms of tax evasion and fraud.”

Criminal tax fraud charges are only pursued in the most serious cases of tax evasion. This includes where a taxpayer has lied to HMRC or when the person is particularly influential.

The rise in tax fraud cases being sent to the criminal courts forms part of a broader crackdown on major tax evasion and fraud by HMRC. Both the Conservatives and Labour have already committed to a post-election crackdown on tax evasion and tax avoidance.

Taxpayers can attempt to agree with HMRC that its investigation will be civil rather than criminal in exchange for them confessing to all their unpaid tax and paying significant penalties.

HMRC opened 1,091 of these civil investigations – known as COP8 and COP9 – in the last year. Penalties include up to 200% of the tax owed plus interest if the taxpayer it engaged in offshore tax evasion. However, the taxpayer does not risk a prison sentence under civil investigation.

Porter said: “A criminal investigation is something anyone who has not paid tax properly should try to avoid. Even the biggest financial penalties are preferrable to a prison term. It is possible for taxpayers to proactively agree with HMRC that it will only undertake a civil investigation, so long as they are full and frank about anything they have done wrong. If they try to hide anything at all, HMRC can withdraw its agreement and pursue criminal charges against them.”

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