The number of criminal convictions secured by HMRC against individuals for
tax offences has fallen by 28% year-on-year.
Through a Freedom of Information request law firm McGrigors found HMRC
secured 157 convictions to 30 September 2009 against individuals for tax
compared to 219 the previous year.
74 of the prosecutions secured in the last year were for offences related to
VAT – which is the area targeted by criminal gangs in carousel fraud, also known
as Missing Trader Intra-Community fraud.
John Benstead, a partner at McGrigors and a former Inland Revenue prosecutor
“HMRC has been putting forward fewer and fewer cases for prosecution because
it is worried about losing cases in front of juries.”
The taxman lost £7bn through evasion last year, according to McGrigors.
Tax amnesties such as the New Disclosure Opportunity are expected to bring in
around £2bn, and the Liechtenstein Disclosure Facility to collect £1bn over its
five year life span.
In the backdrop of this, the law firm warned HMRC would have to employ all to
bridge the gap.
Jason Collins, head of McGrigors’ tax disputes and investigations team said,
“HMRC is smarting from the low level of take-up that it has had for its tax
It believes there are a lot more evaders out there and that those people just
aren’t afraid of HMRC anymore.”
“The collapse in criminal prosecutions for tax offences means that HMRC has
risked squandering one of its biggest weapons of deterrence.”
But Colins added there had now been a shift in policy which could see HMRC
ramp up its criminal cases.
HMRC seems to be saying we will go for more prosecutions, longer sentences
and lots of publicity for those cases,” Collins said.
“More criminal prosecutions is seen by some as the natural flipside of HMRC’s
tax amnesty programme – that you can’t have carrots without sticks.
The taxman responded:
“HMRC tackles fraud very effectively and does not hesitate to use its
criminal investigation powers to pursue a prosecution, where appropriate.
“However, cost-effective civil settlements procedures are used in most tax
“This represents excellent value for the Exchequer as all undeclared tax is
repaid by the tax cheat and additionally they pay a penalty which can be up to
100% of the tax evaded.
“Our approach to prosecution is selective. If the circumstances justify
criminal prosecution then that’s what happens.
“Civil proceedings ensure all undeclared tax is repaid together with a
penalty which can be up to 100% of the tax evaded.
“We collect billions of pounds of evaded tax using these well established
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