HMRC’s first probes into corporate tax evasion facilitation

HMRC has confirmed that it has opened its first investigations into the corporate criminal offence of failure to prevent the facilitation of UK tax evasion, using new powers to tackle corporate fraud contained in the Criminal Finances Act, introduced in the wake of the Panama Papers leaks

Law firm Greenberg Traurig says the tax authority’s response to its freedom of information request stated that ‘HMRC currently has less than five criminal investigation into behaviours occurring since 30 September 2017 for an offence under Article 45.

‘These investigations have been commenced since November 2018 and are the first in a pipeline of cases HMRC has under development that may have Article 45 implications.’

The corporate criminal offence of failure to prevent the facilitation of UK tax evasion forms part of a crackdown on money laundering. It is intended to hold companies and partnerships automatically liable by criminalising the facilitation of domestic and foreign tax evasion by means of not having ‘reasonable prevention procedures’ in place to prevent their ‘associated persons’ from facilitating it. Sanctions include unlimited financial penalties.

In justifying their refusal to confirm the exact number of case it is pursuing, HMRC’s response stated: ‘We believe that the release of some of this information would risk identification of the individuals concerned. For this reason, HMRC has chosen not to provide an exact figure where the true number falls between one and five.

‘However, it should not be assumed that the actual figure represented falls at any particular point within this scale; “five or fewer” is used as a replacement value from which it would be difficult to isolate or extract any individual data.’

While HMRC has sole responsibility for investigation of the UK offence, the Criminal Finances Act 2017 also introduced an offence of failing to prevent the facilitation of foreign tax evasion, which is covered by the National Crime Agency (NCA) and Serious Fraud Office (SFO).

Barry Vitou, head of white collar and investigations at Greenberg Traurig London, said: ‘We know HMRC are keen on pursuing an increasing number of criminal investigations, as stated in their 2018 business plan. The plan included a target of 100 investigations a year by the end of parliament.

‘Despite the apparent “pipeline of cases” it has under development that may involve the offence, it is likely to be some time until we see the first prosecution for the UK offence which will require the approval of the Crown Prosecution Service.

‘Although many will welcome the fact that HMRC is utilising its powers of criminal investigation to consider behaviour that may be caught by the UK offence, it is surprising that the number of investigations involving this offence is so low, particularly given the furore surrounding its inception and entry into law.’

Meanwhile, the SFO has refused to confirm or deny that it holds any details of the number of open investigations it has in respect of the foreign facilitation offence. The agency’s response to a request states: ‘To confirm or deny whether such information is held in respect of any SFO investigations would…be likely to prejudice the SFO’s conduct of future or ongoing criminal investigations and therefore compromise our ability to tackle and prevent serious crime’.

Vitou said: ‘HMRC’s confirmation shows it means business. On the other hand the SFO’s lack of transparency, in contrast to HMRC, is disappointing given the public interest in understanding whether the agency is doing its job.

‘After a slow start HMRC are now up and running with a small number of investigations and others in the pipeline. Against a backdrop of potentially shrinking tax revenues post Brexit this may be another means of plugging the gap’.

Report by Pat Sweet

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