Tax evasion convictions jump 38%

The number of criminal convictions for tax evasion jumped by 38% over the past year as HMRC has taken a more focused approach, according to law firm McGrigors. Nick Huber reports.

The number of convictions for tax evasion increased by 38% to 148 for the year to 31 March 2011, according to figures obtained from HMRC under the Freedom of Information Act.

The tougher line follows the government’s commitment to make an additional £917m available to help the tax department to tackle evasion, avoidance and fraud. “Tax evasion is being tackled head on through targeted disclosure opportunities, backed up by third party data and state-of-the-art IT,” a spokesman told AccountingWEB.co.uk

“The days of using off shore tax havens to evade UK taxes are drawing to a close as this week’s developments in Switzerland have demonstrated. The only rational option is to talk to us because this always makes more financial sense than waiting to be caught.”

As part of the crackdown five taxpayers, believed to be plumbers, were arrested last week and around 600 are under civil investigation by HMRC for failing to pay the right amount of tax, McGrigors noted.

McGrigors said that the increase in criminal convictions for tax evasion shows that HMRC’s “get tough’” strategy is already bearing fruit.

Jason Collins, a partner of McGrigors, said “The number of criminal convictions for tax evasion had been in decline for several years. This is quite a significant reversal of that trend and should be a wake-up call for tax evaders.”

“The low number of convictions in the past probably acted as a green light to hardcore tax evaders who felt that the chances of actually ending up behind bars were pretty negligible.”

If HMRC is to increase the number of criminal prosecutions for tax evasion each year it will need to recruit more specialist tax investigators, he added. About 30,000 jobs have been cut from HMRC over the past five years, with more to come.

HMRC’s international crackdown on tax evasion has included a disclosure facility, information exchange agreements with tax havens and a “withholding” tax.

Last week, the UK and Switzerland and governments signed a “landmark” deal to tax money held by British citizens in Swiss bank accounts.

Under the Swiss-UK tax deal, which comes into force in 2013, the Swiss will tax the bank accounts of UK citizens and transfer the money directly to the Treasury, but without revealing the identity of account holders.

Experts reckon that the Swiss tax deal will increase demand for the Lichtenstein Disclosure Facility which charges a fixed 10% penalty on undeclared income --significantly lower than normal penalties.

Taxpayers with undisclosed liabilities have until March 31 2015 to come clean about their finances by using the LDF.

Collins said: “Taxpayers need to weigh up a 10% penalty and reduced tax bill against a possible prison sentence, seizure of assets and unlimited fine. If the Revenue finds you first, the chance of using the LDF is gone. Many tax evaders are facing this stark choice.”

Comments

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The Black Knight | | Permalink

A few cases that are not very well publicized are unlikely to work as a deterrent.

Why don't HMRC make more of this ? They were going to publish the names of deliberate defaulters but obviously have not caught any yet.

The cases that do seem to have been prosecuted are very large missing trader frauds.

This gives the impression that they do not prosecute small crimes say of less than a £million.

 

first of the plumbers sent down ?

The Black Knight | | Permalink

http://nds.coi.gov.uk/content/detail.aspx?NewsAreaId=2&ReleaseID=423911&SubjectId=2

 

Again the judges remarks have confused avoidance with evasion ?