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Sleepless nights as HMRC’s tax evasion property raids jump 12%

PROPERTY SEARCHES by HM Revenue & Customs to target tax evasion jumped by 12% to 500 in the last year, according to official data obtained by law firm Pinsent Masons.

The figure, which covers the year to 31 March 2014, marks an increase from 445 property raids in 2012/13.

This is more than triple the number of property raids that HMRC undertook each year between 2008 and 2011, sister title Professional Adviser reports.

According to Pinsent Masons, the sharp jump in property raids since 2011 is a result of HMRC’s sustained efforts to deliver its goal of increasing prosecutions for tax evasion.

HMRC’s target is to prosecute 1,165 people for tax evasion in 2014-15, five times more than its 2010 target of 250 prosecutions.

HMRC raids are often carried out early in the morning to catch suspects off-guard or during holiday seasons when a suspect’s legal advisers might be away. HMRC’s objective is to seize as many documents and computers as quickly as possible, said Pinsent Masons.

Head of tax at the law firm Jason Collins said: “HMRC is making a huge effort to up the ante against tax evasion, raiding more properties and arresting more suspects to keep up with its criminal prosecutions target.

“HMRC are also casting their net wider, not only going after the very biggest suspected tax evaders but also increasingly targeting middle class professionals, like bankers and lawyers. Even though the value of the tax evaded in those cases is relatively low, HMRC is keen to pursue those cases to the bitter end as a deterrent to other tax evaders.

“These raids and arrests are designed to give all tax evaders sleepless nights.”

Pinsent Masons said raids on homes and businesses to seize evidence of tax evasion and to make arrests are now increasingly being used to supplement HMRC’s traditional methods of running tax investigations – such as prearranged visits to review business records.

HMRC teams that undertake property raids also have the right to search individuals and many will have the power to make arrests without the presence of a police officer or the need to seek an arrest warrant.

Collins said: “Raiding properties is partly about HMRC demonstrating the police-style powers that it has in a dramatic show of force.

“HMRC wants to send a very clear signal to individuals and businesses that evading tax has very serious consequences.”

A particular focus for HMRC is those who hide money offshore and it plans introduce a new “strict liability” offence of failing to disclose offshore income.

Pinsent Masons said if this move is given the go ahead to it would make it easier for HMRC to get a warrant to raid a property, as the Revenue service would no longer have to show a court there are grounds to suspect an intent to evade tax, just that tax was due and not declared, even if it was an oversight or error on the part of the taxpayer.

From 1 July, financial accounts – including interest in certain offshore trusts and companies – will become liable to reporting to HMRC.

This month saw HMRC remove the ability for those accused of tax fraud to deny wrongdoing but cooperate with authorities from its Code of Practice 9 (COP9) policy. From 1 July 2014, tax payers can only admit fraud, make a full disclosure and receive immunity from prosecution, or deny the allegations and refuse to cooperate with investigations.

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