Out-Law News 3 min. read

Select Committee pressure on HMRC could force costly high-risk prosecutions, said expert


Pressure on the UK's HM Revenue and Customs (HMRC) from the Treasury Select Committee and the Public Accounts Committee (PAC) could force the agency into recommending expensive and high-risk prosecutions warns Fiona Fernie , a tax expert at Pinsent Masons, the law firm behind Out-law.com.  

HMRC answered questions from the Treasury Select Committee yesterday on its handling of leaked information about accounts held with the Swiss branch of HSBC, having previously also appeared before the Public Accounts Committee on the same issue.

HMRC's Chief Executive, Lin Homer, announced in the hearing that the French authorities have formally agreed that HMRC can share stolen HSBC Suisse customer account data with other law enforcement agencies and regulators, for the purposes of pursuing criminal offences.

HMRC said that it received the data from the French in April 2010 under very strict international treaty conditions, which limited its use to tax purposes only and prevented HMRC from sharing the data with other law enforcement authorities for investigating other potential offences.

According to HMRC, the French authorities have now given written confirmation that they are lifting restrictions on the use and sharing of the data with other law enforcement agencies and regulators for the purpose of investigating criminal offences.

Lin Homer told the committee that HMRC had identified from the leaked information around 150 accounts that could have criminal intent. However only one successful prosecution had followed out of 20 cases that were referred to the Crown Prosecution Service (CPS). Homer said that much of the leaked evidence was "too weak" to support successful prosecutions. However she said £120m of unpaid tax and interest had been recovered from Swiss account holders plus £15m in penalties.

Homer told the committee that she did not think there would be a "waterfall" of new prosecutions coming from the Swiss data even though HMRC can now share the date with other agencies.

At a PAC hearing earlier this month Margaret Hodge, chair of the committee, accused Lin Homer of a "pathetic response" to the leaked data.

Fernie said “Even if the HSBC data does not lead to any further tax prosecutions, it is difficult to imagine that HMRC can simply shrug off the immense political pressure that they are coming under at the moment to put more high-profile, high net worth cases forward for prosecution. The result of this is that we see a lot more complex, and costly tax cases coming forward for prosecution.”

"There is a legitimate debate to be had over whether this is the best use of HMRC’s scarce resources. HMRC and the CPS have a good track record of securing convictions for fairly run-of-the mill tax evasion cases, but for complicated cases, even high profile ones like the Harry Redknapp trial, the results seem to be more mixed. HMRC faces Hobson’s choice – take a pragmatic approach and focus on successfully litigating the lower value cases, or take a moral stance and target higher value cases even where the odds of securing a return for the exchequer are longer.”  Fernie said.

In January 2013 the then  Director of Public Prosecutions, Keir Starmer announced that the CPS intended to substantially increase the number of tax cases it took on with a view to prosecution.

 “It remains to be seen whether the end of the Liechtenstein Disclosure Facility (which is effectively a partial amnesty) in a year’s time will make it easier to secure convictions on the basis that taxpayers with irregularities in their affairs had ample opportunity to disclose them since the LDF was well publicised and in operation for over 6 years, so any escalation of tax evasion prosecutions at the moment would be a very high risk approach” Fiona Fernie said.

The Liechtenstein Disclosure Facility (LDF) is a disclosure process for taxpayers with UK tax irregularities connected to a bank account, investment or structure in Liechtenstein. Tax, interest and a penalty will be charged, but HMRC is only seeking tax for the period from April 1999, rather than the normal 20-year period. The LDF can also be used by taxpayers without an existing connection to Liechtenstein, including those without an offshore asset or bank account. The LDF is only available for new registrations until 5 April 2016.

HMRC said that it has arranged a multi-agency meeting next week, to discuss how the stolen HSBC Suisse data can be shared. The agencies involved include the Serious Fraud Office, the Financial Conduct Authority, the CPS and the City of London Police.

Last weekend Chief secretary to the Treasury, Danny Alexander proposed in a TV appearance, a new criminal offence of "corporate failure to prevent economic crime", aimed particularly at banks and accountancy firms that promote illegal tax evasion.

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