HMRC dawn raids increased by 34% in five years

The number of dawn raids carried out by HMRC have increased 34% in the last five years, from 499 in 2011-2012 to 669 in 2016-2017, according to law firm Pinsent Masons. This uptick is part of HMRC’s efforts to clamp down on white collar tax evasion.

In the instance of such a raid HMRC obtains a warrant and carries out the search of a property where it suspects tax evasion to have occurred, and can seize physical and electronic documents to use for prosecution.

The number of property raids carried out by HMRC rose from 1,449 in 2015-2016 to 1,563 in 2016-2017, a rise of 8%.

Pinsent Masons explained this applied to white collar tax evasion committed by wealthy individuals or businesses as well as other forms of tax evasion, such as “the illegal trade in cigarettes and alcohol and benefit fraud”.

Jason Collins, Head of Tax at Pinsent Masons said: “HMRC have shown they are not afraid to come down hard on large corporates they suspect of tax evasion – obviously, the reputational impact of dawn raids can be devastating.”

“Despite political pressures tightening their squeeze on HMRC, numbers of property raids remain high – raiding property is a vital way for HMRC to get hold of the crucial evidence it needs. HMRC continue to use all the weapons in their arsenal to target tax evaders, including production orders.”

HMRC’s fight against tax evasion may be ramping up, but the format may be changing. Pinsent Masons noted that despite the long-term increase in dawn raids, there has been a 12% decrease in raids relating to white collar tax evasion – from 761 in 2015 to 669 in 2016. However, this does not indicate a slowing of action, but rather that HMRC are shifting towards using production orders rather than undertaking raids, which can be costly and disruptive. When obtained from a judge, production orders allow the Revenue to obtain documents from the evasion suspect as well as third parties such as advisers or banks.

Legislation introduced under the Criminal Finances Act 2017 that makes failure to prevent tax evasion a criminal offence comes into force 30 September, and will bring with it a bevy of new powers for HMRC to tackle tax evasion.

Collins commented: “The new offence means HMRC will be investigating how businesses, or their employees, might be assisting or encouraging tax non-compliance by their business partners, customers, contractors and suppliers. Therefore, there may be an increase in raids after it becomes operational this September.”

“Banks and professional services companies have a high risk of their staff or agents being involved in tax evasion, because of the large amount of capital handled by them. However, the new offence applies to all sectors, and all companies should be aware of how they may be affected.”

HMRC are also increasingly using the Serious Organised Crime and Police Act (SOCPA) to mandate senior individuals to attend compulsory interviews, the failure of which could result in a maximum two year prison sentence. Any information obtained in these interviews could be used in prosecution.

To mitigate the risk of such raids, Collins suggesred: “To combat the threat of unannounced property raids, companies should refresh their raids and critical incident procedures and seek professional advice in order to know what to do in case HMRC officers appear without warning.”

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