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Cath Everett

Sift Media

Freelance journalist and former editor of HRZone

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Criminal convictions for tax evasion jump 38% in a year

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The number of criminal convictions for tax evasion jumped by 38% over the past year as HMRC has taken a more focused approach to dealing with the problem.

The number of convictions increased  to 148 for the year to 31 March 2011, according to figures obtained from HMRC under the Freedom of Information Act, with the tougher line following the government’s commitment to make an additional £917m available to help the tax department tackle evasion, avoidance and fraud.
 
“Tax evasion is being tackled head on through targeted disclosure opportunities, backed up by third party data and state-of-the-art IT,” a spokesman said. “The days of using off shore tax havens to evade UK taxes are drawing to a close as this week’s developments in Switzerland have demonstrated. The only rational option is to talk to us because this always makes more financial sense than waiting to be caught.”
 
As part of the crackdown five taxpayers, believed to be plumbers, were arrested last week and around 600 are under civil investigation by HMRC for failing to pay the right amount of tax, law firm McGrigors noted. It added that the increase in criminal convictions for tax evasion shows that HMRC’s “get tough’” strategy was already bearing fruit.
 
Jason Collins, a partner at McGrigors, 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 and should be a wake-up call for tax evaders. 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.”
 
If HMRC is to increase the number of criminal prosecutions for tax evasion each year, it will need to recruit more specialist tax investigators, he added. About 30,000 jobs have been cut from the organisation over the past five years, with more to come.
 
HMRC’s international crackdown on tax evasion has included a disclosure facility, information exchange agreements with tax havens and a “withholding” tax.
 
Last week, the UK and Switzerland and governments signed a “landmark” deal to tax money held by British citizens in Swiss bank accounts. Under the Swiss-UK tax deal, which comes into force in 2013, the Swiss will tax the bank accounts of UK citizens and transfer the money directly to the Treasury, but without revealing the identity of account holders.
 
Experts reckon that the Swiss tax deal will increase demand for the Lichtenstein Disclosure Facility, which charges a fixed 10% penalty on undeclared income –significantly lower than normal penalties.
 
Taxpayers with undisclosed liabilities have until March 31 2015 to come clean about their finances by using the LDF.
Collins said: “Taxpayers need to weigh up a 10% penalty and reduced tax bill against a possible prison sentence, seizure of assets and unlimited fine. If the Revenue finds you first, the chance of using the LDF is gone. Many tax evaders are facing this stark choice.”
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Cath Everett

Freelance journalist and former editor of HRZone

Read more from Cath Everett
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