The specialist investigation unit was set up by HMRC in response to an increased focus on offshore tax evasion and other forms of non-compliance, partly as a result of data leaks that have revealed the structures used by individuals and corporates who keep their assets offshore.
HMRC has been set a target of increasing the number of tax evasion prosecutions of wealthy individuals and corporates to 100 each year by 2020. The new ‘Offshore, Corporate & Wealthy’ unit sits within the Fraud Investigation Service, which employs a total of 4,500 specialist investigators. The FIS collected £5bn in extra tax from its compliance activities last year.
Tax disputes expert Jason Collins of Pinsent Masons said HMRC would find prosecuting individuals for offshore tax evasion easier after a new strict liability offence comes into effect in October 2018. The new rules will make it a criminal offence to fail to declare offshore income of more than £25,000 and means that HMRC does not have to prove intent, making it much easier to secure a conviction.
“HMRC’s new offshore unit has clearly hit the ground running – they have deliberately built this team as an ‘elite’ unit of highly experienced accountants and specialist lawyers,” said Collins. “The unit was founded around the time of the Panama Papers leak which was a hugely significant watershed moment in the crackdown on offshore tax evasion. The approach of tax authorities since that leak was been closely watched and HMRC is on the attack.”
Collins said the unit had “vast amounts” of data to examine as it has been receiving information on individuals’ bank accounts from offshore financial centres such as the Channel Islands, Bermuda and the BVI since 2016.
That information had helped HMRC to identify over 3,800 ‘serious’ tax evasion cases in the year to 31 March 2018, a significant increase from the previous year.
“Taxpayers with offshore interests must have their affairs in order because HMRC is pursuing every lead as it looks to hit its prosecution targets,” Collins said.
The unit has so far focused on investigating alleged tax evasion by individuals, but it is also tasked with investigating and prosecuting larger businesses. The Criminal Finances Act 2017 introduced a new offence of failure to prevent the facilitation of tax evasion, which means HMRC can investigate and prosecute companies who have not done enough to prevent their staff and other representative from intentionally helping others to evade taxes.
"All businesses are at risk of committing the new offences – which apply to UK and non-UK tax – but surprisingly few appear to have implemented new controls to manage the risk,” Collins said.