Boris Johnson refuses to rule out further tax rises
HMRC has ramped up its investigation practices in recent months and new analysis from RPC, the international law firm, confirmed the Government is currently investigating 153 suspected “enablers of tax evasion” cases. This includes unregulated tax advisers, which could hit unsuspecting workers.
RPC detailed cracking down on enablers of tax evasion has been a “key area of focus” for HMRC since it established its Fraud Investigation Service in 2015. HMRC’s Fraud Investigation Service has been given additional resources to recruit more staff and as a result, RPC says the number of investigations into tax fraud enablers is likely to increase.
This may impact more people than one would think given the definition of “enablers.”
RPC explained: “The definition of enablers is wide and includes wealth managers or technology companies that provide software which could potentially be used to distort profits, enabling businesses to evade tax.
“Enablers fall under two categories: those who are knowingly complicit in criminal activity and those who may not be aware of their client’s involvement in criminal activity but have failed to carry out proper risk assessment checks.”
This means those who offer advisory services to families, such as financial and estate planners, could be targeted if they’re not careful.
HMRC is focusing on tax evasion (Image: GETTY)
Adam Craggs, Head of Tax Disputes and Partner at RPC, commented: “HMRC is determined to clamp down hard on anyone who aids in tax crimes, not just the perpetrator themselves.
“The Revenue has been effective in identifying traditional tax evasion, with the result that would-be evaders are becoming more sophisticated and are increasingly turning to third parties to assist them.”
Michelle Sloane, a Partner at RPC, continued: “HMRC has broadened its focus considerably and is now coming after a wide range of enablers who it considers are complicit in tax evasion.
“This includes software developers and even those who operate storage facilities that could be used to hide high-value goods. If you are in any way assisting clients evade tax, HMRC may use its criminal powers against you.”
On top of HMRC’s own efforts, taxpayers appear to be more than willing to help tax evasion investigations, putting more in the firing line.
Recently, UHY Hacker Young, the national accountancy group, found that taxpayers made 107,000 reports of suspected tax evasion to HMRC in the last year.
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This surge, UHY Hacker Young detailed, is likely driven in part by HMRC opening a 24/7 “Covid fraud hotline” in October 2020. The hotline allows people to anonymously report suspected fraud in relation to Covid support schemes such as furlough.
The company explained since the last recession, tax evasion has become a much higher profile issue and is viewed as increasingly unacceptable by the public. As a result of this, more individuals are willing to report those who are deliberately underpaying tax.
HMRC previously estimated for the furlough scheme alone, up to £3.5billion of fraudulent or mistakenly claimed money will need to be recovered. HMRC also detailed it received over 28,000 reports of suspected fraud in relation to the furlough scheme.
Phil Kinzett-Evans, Partner at UHY Hacker Young, commented: “This is a remarkable number of reports of tax evasion, given that individuals were deprived of the opportunity to make reports for a third of the year.
Furlough fraud issues have emerged (Image: EXPRESS)
“In the past, more people might have chosen to turn a blind eye to tax evasion, thinking that it was none of their business. Over the last 15 years, people have generally come to accept that paying your taxes honestly is a responsibility everyone shares. Fewer people feel guilty about reporting those who don’t.
“Individuals that have been involved in tax evasion ought to make a disclosure to HMRC at the earliest opportunity and seek specialist advice in the process. HMRC will be far less sympathetic towards those that deliberately conceal their tax affairs and choose to keep quiet.”
HMRC’s success in this area is also rising.
HMRC investigations resulted in 165 individuals being charged with tax evasion in the last six month, up a fifth from the 139 charged in the previous six months as the Government scales up its enforcement activity post-lockdown, according to analysis from Pinsent Masons, the international professional services firm.
The last three months also saw a dramatic improvement in the HMRC’s track record in criminal cases winning 100 percent of all its court cases up from an 88 percent overall success rate for 2019/20 – with a 96 percent overall success rate for the year 2020/21.
This improved success rate has seen tax evaders sentenced to 129 years in custodial sentences in the last six months versus 57 years in the previous six months.
Andrew Sackey, Partner at Pinsent Masons, commented: “Activity levels at HMRC show they are finally shrugging off the disruption caused by lockdown and turning up the heat on tax evaders.
“The kind of intelligence work that HMRC can know undertake and access, especially in terms of gathering financial data, means they’re confident about outcomes when they bring criminal cases. If an individual is charged and convicted, then they risk receiving a prison or a suspended sentence – some for a very long time.
“The current success rates before the criminal courts make it even more important to engage transparently with HMRC if they commence a civil enquiry; willful lack of candor within a civil investigation is one of the key aggravating factors that triggers HMRC considering the switch to the criminal track, and that should be avoided at all costs.
“Those who come forward of their own accord are less likely to face criminal charges.”