Crackdown on tax evasion leads to 38% rise in criminal convictions

Saturday, August 27, 2011

Crackdown on tax evasion leads to 38% rise in criminal convictions

Days of using offshore tax havens 'drawing to a close' says HMRC as figures reveal 38% increase in prosecutions

The number of criminal convictions for tax evasion has jumped by more than a third during the last year as part of a new crackdown by HM Revenue & Customs (HMRC), according to law firm McGrigors.

It said HMRC figures, obtained following a Freedom of Information request, showed there was a 38% increase in convictions for tax evasion, with 148 convictions secured in the year to 31 March 2011, compared with 107 the previous year.

The increase follows a fresh crackdown on tax evasion announced last year as part of the spending review. The Treasury said it would aim to deliver a five-fold increase in criminal prosecutions for tax evasion backed by an additional �900m in funding for HMRC.

HMRC said it could not confirm the criminal conviction figures, but an HMRC spokeswoman said the convictions "would not have been for tax-credit or benefits fraud", while a McGrigors spokesman said "we are certain the figures relate to traditional tax avoidance and evasion".

The tax authority ceased publishing details of tax prosecutions several years ago after it shifted publication of its annual report online.

Dave Hartnett, HMRC'S permanent secretary for tax, said: "The government has made an additional �917m available to HMRC to tackle evasion, avoidance and fraud. This is boosting the number of criminal prosecutions ? Tax evasion is being tackled head on through targeted disclosure opportunities backed up by third party data and state-of-the-art IT.

"The days of using offshore tax havens to evade UK taxes are drawing to a close. The only rational option is to talk to us because this always makes more financial sense than waiting to be caught."

McGrigors warned the increase in criminal convictions for tax evasion shows that HMRC's "get tough" strategy is already bearing fruit, with five taxpayers arrested last week, all believed to be plumbers. Around 600 individuals are under civil investigation by HMRC for failing to pay the right amount of tax.

McGrigors spokesman Jason Collins said: "The number of criminal convictions for tax evasion had been in decline for several years. This is quite a significant reversal of that trend.

"The low number of convictions in the past probably acted as a green light to hardcore tax evaders who felt that the chances of actually ending up behind bars were pretty negligible.

"The perception that tax evasion was not a potentially serious criminal offence had started to take root. These convictions, along with the new power to name and shame tax evaders, will go some way towards changing that perception."

"HMRC has been dangling a carrot in front of tax evaders over the last few years in the form of tax amnesties. With HMRC having offered tax evaders the chance to come clean, it will feel justified in making greater use of the proverbial stick."

McGrigor's figures on tax evasion come in the same week it was disclosed that Switzerland will pay Britain up to �380m in lieu of unpaid tax by British account holders in the country, with the possibility of more to come.

Mark King

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