'Political pressure' pushing up HMRC investigations into serious tax evasion, says expert

There was an 8% increase in the number of cases passed on to HMRC's dedicated Evasion Referral Team by its local offices, according to the figures; up to 2,972 in 2015/16 from 2,749 in 2014/15.

The increase comes at a time when HMRC is under political pressure to be seen to be effectively tackling aggressive tax avoidance and evasion, according to tax expert Fiona Fernie of Pinsent Masons. It was also allocated an additional £800 million in funding with which to do so as part of the 2015 Summer Budget.

"HMRC is very alive to the ongoing need to tackle serious on-shore and offshore tax evasion," Fernie said. "Although significant progress has been made to deter offshore tax evasion in recent years, the battle is far from over."

"Headline-hitting exposés like the Panama Papers leak and the HSBC Swiss banking scandal highlight that sheltering wealth from the taxman remains an extremely highly-charged issue. This is exacerbated by the apparent blurring of the lines between avoidance and evasion, and the fact that many individuals seem to assume that any type of tax structuring which involves off-shore is automatically illegal," she said.

"HMRC now has more weapons in its arsenal to help it hit increasingly exacting enforcement targets. There is no question that it is prepared to use them to powerful effect to clamp down on wrongdoing and maximise the deterrent value. Anyone who is concerned that their tax position is compromising is likely to find that the taxman looks more favourably on them if they come forward of their own volition to reach a solution," she said.

Earlier this year, the House of Commons Public Accounts Committee (PAC) criticised HMRC for not doing enough to tackle tax evasion and other types of "tax fraud". According to the report, the failure by HMRC to prosecute more than one individual from the so-called 'Falciani list' of individuals with Swiss bank accounts provided to the UK by the French government "creates the impression that the rich can get away with tax fraud".

The PAC has previously criticised HMRC for its "woefully inadequate" record of prosecuting cases of offshore tax evasion. However, Fernie said at the time that these figures reflected the UK government's previous strategy of encouraging individuals to come forward and voluntarily disclose any tax irregularities through the Liechtenstein Disclosure Facility (LDF) and similar initiatives. The LDF closed at the end of 2015; and from 2017 a new 'strict liability' offence will apply where a UK taxpayer fails to notify HMRC that they are chargeable to income tax or capital gains tax in respect of offshore income, assets or activities regardless of whether or not the failure was deliberate.

According to the 2015 Summer Budget, HMRC is expected to recover an additional £7.2 billion in unpaid tax by the start of the next decade as a result of the £800m additional funding, which is to be invested in tackling tax evasion and compliance activities. It is also expected to triple the number of criminal prosecutions it brings in relation to serious and complex tax crime, to 100 per year within five years.

"HMRC is using increasingly sophisticated tools and techniques to uncover wrongdoing – from closer liaison with overseas tax authorities to cutting-edge data analytics which can flag up anomalies or trends within the information that HMRC and other government agencies hold," Fernie said. "This should result in continuous improvements in HMRC's success rate both in identifying suspected crime and prosecuting those cases successfully."