Panama papers: named individuals should seek professional advice as HMRC investigation likely, says expert

Out-Law News | 04 Apr 2016 | 2:10 pm | 2 min. read

HM Revenue & Customs (HMRC) is likely to launch an investigation into the UK tax affairs of some individuals named in the so-called Panama papers, an expert has said.

Tax investigation specialist Fiona Fernie of Pinsent Masons, the law firm behind Out-Law.com, said that the named individuals "should seek professional advice immediately".

Fernie was commenting after millions of documents reportedly detailing the use of offshore tax structures in Panama by some prominent public figures were obtained by the media.

"Any information which suggests UK-based individuals are involved in tax evasion through Panamanian structures is likely to lead to a burst of investigative activity by HMRC," Fernie said. "It is likely they will look closely at anyone named in the data."

"HMRC now has a good amount of experience dealing with data leaks, and is likely to respond quickly and efficiently. As with the HSBC Geneva data leak, anyone named in the list with UK tax affairs is likely to receive a letter and face follow-up investigation," she said.

Fernie said that Panama is a popular location for people to invest their money, especially for those who are internationally mobile and those who spend a lot of time in the Americas. She said there is "likely to be a wealth of data for HMRC to look at".

"Any individual with UK tax affairs whose name is involved in the data leak – even those whose affairs are entirely legitimate – should seek professional advice immediately, as HMRC is likely to contact them very soon," Fernie said. "The costs of dealing with even the simplest enquiry of this type can run into five figures, so being able to demonstrate quickly that activity is legitimate will be key."

In a statement HMRC's direct of enforcement and compliance Jennie Granger said: "HMRC can confirm that we have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation. We have asked the ICIJ (International Consortium of Investigative Journalists) to share the leaked data that they have obtained with us. We will closely examine this data and will act on it swiftly and appropriately."

"We have brought in more than £2 billion from offshore tax evaders since 2010 and the government has repeatedly strengthened our powers and resources with new criminal offences and higher penalties, so we can take even tougher action against the minority who try to cheat the honest majority by hiding their money in offshore tax havens," she said. "Our message is clear: there are no safe havens for tax evaders and no-one should be in any doubt that the days of hiding money offshore are gone. The dishonest minority, who can most afford it, must pay their legal share of tax, like the honest majority already does."

Other tax authorities, regulators and enforcement agencies from across the world have also said they have been scrutinising the leaked data and plan to carry out follow-up investigations.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said that the information contained in the leaked documents could potentially help businesses that have fallen victim to fraud to identify missing funds.

“Such wide scale disclosure of offshore entities provides possible easy pickings for the victims of fraud especially as the information appears to have been disseminated to so many countries,” Sheeley said. “The disclosure may enable fraud victims a unique opportunity to recover losses using the many available civil remedies offered by courts in jurisdictions around the world to help them to locate, freeze and recover assets. However, time is of the essence if victims want to maximise their chances of tracing assets and recovering monies. Civil fraud solicitors who are experts in cross border litigation are  aware of the many nuances of different jurisdictional issues and can form a global response plan to deliver the victim’s primary goal – recovery of the stolen monies.”