The government launched 1,007 prosecutions against individuals for tax evasion offences last year, as the HMRC clampdown on tax evaders intensified
HMRC’s ability to investigate and prosecute taxpayers has been strengthened as the volume of data it receives on individuals’ offshore bank accounts from jurisdictions such as Bermuda and the Cayman Islands has increased, providing insight into the movement of cash and assets offshore.
It has also benefited from access to information on offshore taxpayers’ accounts provided under the Common Reporting Standard, which came into force from September 2018. This is now being extended as more countries start to exchange information; Switzerland and the United Arab Emirates (UAE) will start to exchange information with the UK later this year.
Despite the growing number of individual prosecutions for tax evasion, few business tax evasion cases are referred to the Crown Prosecution Service (CPS), according to analysis by Reuters Thompson. Cases involving businesses tend to be more complex and can take longer, which may explain the fact that fewer cases referred to the CPS for prosecution.
HMRC is increasingly focusing on ‘bigger-ticket’ tax evasion cases involving businesses, as they tend to generate higher levels of additional revenue. Penalties imposed on businesses for non-compliance are much larger, which increases HMRC’s overall compliance yield.
Brian Peccarelli, chief operating officer, customer markets, Thomson Reuters says: ‘At the centre of HMRC’s tax evasion crackdown is an unprecedented data gathering exercise – bringing in far richer information from an increasing range of countries. HMRC will be running that data through its increasingly sophisticated artificial intelligence (AI) tools.
‘Prosecutions are up significantly over the last five years and are likely to increase as new data sources filter through.
‘HMRC is also increasingly chasing more complex, higher value tax evasion cases involving businesses, sending a strong message that will influence attitudes towards non-compliance.’
Additionally, HMRC’s ability to investigate and prosecute businesses for tax evasion has been reinforced by legislation introduced through the Criminal Finance Act last year. Under the new ‘failure to prevent’ rules, businesses are now liable for the actions of their employees and any contractors they use.
HMRC already has access to its £80m Connect database when investigating taxpayers. Connect collects data on taxpayers from multiple sources and then cross-references information on tax returns with data collected by Connect to flag up individuals and businesses for investigation.