Out-Law News 2 min. read

Serious tax evasion cases targeted by HMRC at a five-year low

The number of cases of serious tax evasion identified and investigated by HM Revenue and Customs (HMRC) fell by 16% this year to hit a five year low, according to figures obtained by Pinsent Masons, the law firm behind Out-Law.com.

Between 1 April 2012 and 31 March 2013, local HMRC offices referred 2,888 suspected 'serious' cases to the central Evasion Referral Team, according to the figures. This was a substantial drop on the 3,456 cases identified the previous year, and the 4,506 cases identified in tax year 2010/11.

Tax expert Phil Berwick of Pinsent Masons, the law firm behind Out-Law.com, said that the figures did not "tally with the rhetoric from some quarters than the British economy is being undermined by a chronic under-collection of tax revenues".

"HMRC has plenty of tools at its disposal to catch tax evaders, which serves as a huge deterrent to those considering tax evasion," he said. "A fall in serious tax evasion cases being identified is definitely not down to any waning of HMRC's determination to pursue tax evasion."

'Serious' tax evasion cases, as defined by HMRC, are those where the amount of tax in dispute is over £50,000, or those where prosecution would be possible if the individual or company was found guilty. Once identified by local revenue offices, these cases are passed on to the central Evasion Referral Team for further investigation.

Recent years have seen an expansion of HMRC's resources for tackling suspected tax evaders, as well as an increase in the number of treaties between the UK and other countries to improve attempts to catch those who use offshore accounts to hide assets and avoid their tax liabilities. A new Offshore Coordination Unit (OCU), which coordinates HMRC's analysis of the extra information it now receives about offshore accounts held by UK taxpayers, is one of several new 'task forces' set up by HMRC to help prevent cases of serious tax evasion.

HMRC is now also able to impose penalties of up to 200% of the original tax owed if a taxpayer does not declare and income or capital gains hidden in an offshore bank account. The department has also begun using private sector expertise to improve its data analysis and strategy, and has hired 2,500 additional inspectors.

"International co-operation has been stepped up significantly as HMRC has striven to curb tax evasion," tax expert Phil Berwick said. "Tax evaders are now realising that HMRC has a much greater ability to tackle evasion, even if individuals conceal their assets abroad. Within the UK, HMRC has really ramped up its activities and has adopted a more focussed approach. It is now fully prepared to use all the powers at its disposal to target anyone or any business it believes to be evading paying their tax."

"Five years ago some individuals and businesses perhaps felt that evading tax was relatively easy. Now they can see that HMRC is much more proactive and better informed than in the past, increasingly they are deciding that tax evasion just isn't worth the risk," he said.

Last week, the UK and the world's other leading economies agreed new measures to increase international cooperation in relation to the investigation of suspected tax evasion and avoidance. At the G8 summit in Lough Erne, Northern Ireland, national leaders announced that they would work with the Office for Economic Cooperation and Development (OECD) to develop a new model for global automatic exchange of information between tax authorities. G8 states will also investigate options for maintaining national registers of corporate beneficial ownership, which they have pledged to provide to other states "on request".

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