HMRC fails to deliver on pledge to increase criminal prosecutions by end of 2020, FOI request reveals

21 December 2020

HMRC has dramatically failed to deliver on the pledge in its 2015 – 2020 business plan to increase the number of criminal prosecutions of wealthy individuals and corporates to 100 per year by 2020, according to information obtained via a Freedom of Information request made by Kingsley Napley.
 

The objective HMRC set itself 5 years ago followed significant criticism from the Public Accounts Committee (PAC) which hauled HMRC over the coals for a  “staggering” £16 billion denied to the Treasury due to tax fraud and the £34 billion tax gap.  The MP group called for a heightened number of investigations into wealthy tax evaders and described the number of prosecutions for offshore tax evasion undertaken by the agency as “woefully inadequate”.

The PAC urged HMRC “to increase the number of investigations and prosecutions, including wealthy tax evaders, and to publicise this work to deter others from evading tax and to send out a message that those who try will not get away with it.”  

In October 2020, Kingsley Napley carried out a Freedom of Information request to see how HMRC had fared against the target it set itself, following the removal of this pledge from its updated business plan.  The response shows that HMRC’s performance in addressing the tax fraud gap has been abysmal.

There has not been one prosecution of a company from 2015 – 2020, despite the additional fillip of the Corporate Criminal Offence coming into force on 30 September 2017. 

The number of wealthy individuals (which HMRC defines as including potentially wealthy, mid-sized and large businesses) investigated for tax crime in the year 2019/20 was 46 and the number of charges for tax evasion for the same period was 32. Lower figures applied for previous years.

The overall numbers of criminal prosecutions for tax evasion year on year are significantly lower than the peak of 1288 reached in the 2014/15 tax year.  Only 548 individuals in total were charged under the tax evasion regimes in the 2019/20 tax year.

David Sleight, partner in the Criminal Litigation team, who specialises in defending clients subject to tax related investigations and prosecutions, comments:

"These figures are pretty staggering notwithstanding Brexit and Covid. HMRC has been gifted 100 new measures to combat tax evasion and avoidance over the last 10 years and knows it is under pressure to deliver a step change in results. Yet it has undoubtedly failed to use its powers consistently or effectively.

"In my experience of recent dealings with HMRC, when it does act it will often take on the wrong case in the wrong forum. There is a scatter gun approach to civil or criminal action and a serious lack of application and focus.   Investigations into tax payers can last years with little progress being made and whilst people’s lives are put on hold.

"The Government and law-abiding tax payers should, once again, be questioning whether HMRC’s criminal investigation strategy is working, certainly in the current climate where every penny counts.   How it progresses with its investigations into the billions of pounds purportedly lost to furlough fraud will be under particular scrutiny."

David Sleight was also quoted in an article in Financial Times on 21 December 2020 - UK tax evasion prosecutions fall by half in 5 years and The Telegraph on 22 December 2020 - Taxman in 'staggering' failure to prosecute evaders.

Further Information

For further information on the issues raised in this blog, please contact a member of our Criminal Litigation team in confidence.

 

About the author

David Sleight is a Partner in the Criminal Litigation team who regularly acts for individuals and companies in high profile cases. He specialises in defending tax evasion and fraud allegations brought by HMRC and has developed a specialist expertise in advising in cross border tax litigation involving Mutual Legal Assistance requests between Member States.

 

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