Revenue & Customs set to miss target for prosecution of tax evaders
Tax authority set a target of 1,165 people a year by 2014/15, but analysis of the last tax year shows it prosecuted just 795
£119.4bn of UK tax went unpaid, avoided or evaded in the financial year 2013/14, with evasion totalling £82.1bn, according to campaigner Richard Murphy. Photograph: Daniel Lynch for the Guardian
HM Revenue and Customs has fallen behind in its pursuit of criminal prosecutions for tax evasion, which costs the UK £35bn a year.
The tax authority set a target of prosecuting 1,165 people a year for tax evasion by the 2014/15 financial year, but analysis of the last tax year shows HMRC prosecuted just 795 people. It means HMRC will have to increase the number of prosecutions this year by 46% to hit its target.
Analysis by Thomson Reuters shows that despite the government pumping in an extra £1bn to beef up HMRC capabilities the number of prosecutions increased by 29% to 795 in the 2013/14 tax year. The number of prosecutions more than doubled between 2011/12 and 2012/13 to 617.
David Gauke, the financial secretary to the Treasury, said: “We’re determined to bring the small minority who break the law to cheat on their tax to justice. Following the government’s 2010 spending review commitment to invest an additional £1bn into HMRC, criminal prosecutions for tax evasion have increased fivefold. These figures send a clear message that we will not put up with tax evasion.”
In August HMRC announced plans to make it a criminal offence to hide money offshore. Under the plans, which are under consultation until the end of the month, HMRC would no longer need to prove that people who have undeclared income offshore intended to evade tax.
The change would mean that for a criminal conviction to be handed down HMRC only had to demonstrate income was taxable and undeclared.
Emma Nendick, the head of tax at Thomson Reuters’ Practical Law service, said: “HMRC has got suspected tax evaders firmly in its sights, taking more and more cases to the criminal courts in an effort to clamp down on this area.
“Criminal records and prison sentences are not just an idle threat. In fact the increasing volume of criminal prosecutions is one of the measures by which HMRC now judges its success.
“Whilst public attention has recently been focused on tax planning by corporates and high-net-worths the legal profession is seeing a marked increase in criminal cases.”
The tax campaigner Richard Murphy recently calculated that £119.4bn of UK tax went unpaid, avoided or evaded in the financial year 2013/14, with evasion totalling £82.1bn.
Murphy, who argues HMRC needs extra resources to tackle evasion and avoidance, has criticised the methodology used by HMRC, “which relies on ignoring the fact that tax evaders do not submit tax returns or file their company accounts with HMRC or Companies House”.
Tax avoidance is legal while evasion is a criminal act, though crackdowns on aggressive and artificial avoidance scams have blurred the lines between the two.
Murphy has said it is “absurd” to estimate evasion from tax returns submitted to HMRC when “the failure to submit a tax return at all is the main way in which a tax evader seeks to achieve their goal of non-declaration of tax owing”.
Outlining the new criminal offence, Gauke said: “Offshore evasion is illegal and harmful. It is unfair that those who can afford to use expensive offshore banks and complex financial structures can evade their responsibility to pay the taxes which fund vital public services.
“If taxpayers do not come forward to clear up their past non-compliance, or if they continue to fail to comply with their obligations in this new era of transparency, then they must face tough consequences. One of these consequences should be the realistic threat of a criminal conviction.”