On 9 May HM Revenue and Customs (HMRC) repeated its message that it is in pursuit of those who attempt to avoid or evade tax with an announcement that it is working with US and Australian tax authorities on data which “reveals extensive use of complex offshore structures to conceal assets by wealthy individuals and companies”. Although this material is still in the process of being analysed, HMRC are using the threat of criminal prosecution or significant fines and public naming and shaming to encourage “voluntary compliance and early disclosure of tax irregularities”.
This follows a number of earlier announcements demonstrating HMRC’s shift in focus from criminal gangs who work outside of the tax regime to tax payers and their advisers who use methods to avoid or evade tax, in particular:
In January HMRC announced 100 new inspectors were to be recruited in to its affluent unit due to the expansion of the unit’s work from taxpayers with an annual income of more than £150,000 and wealth of between £2.5 million and £20 million, to those with wealth in the range £1 million to £2.5 million. At the time, HMRC stated that the unit was ahead of target by bringing in an extra £75 million in tax by the end of December.
Later that month the Director of Public Prosecutions announced that the Crown Prosecution intended to substantially increase the number of tax cases it takes on with a view to criminal prosecutions, with a target to increase the number of tax files it handles fivefold to 1,500 by 2014-15. In particular the increase in resource is to enable the CPS to target complex tax avoidance schemes that they believe are dishonest.
In March, alongside the budget, it was announced that there would be £1billion invested in a clampdown on tax avoidance and evasion plus proposed new legal powers to tackle tax evaders and the promoters and users of avoidance schemes.
In addition there has been a trend of increased cooperation with overseas jurisdictions to increase the amount of information automatically exchanged on potentially taxable income, including initiatives with Switzerland, Liechtenstein, Isle of Man, Guernsey and Jersey.
This latest data is purported to show the use of companies and trusts in a number of territories around the world including Singapore, the British Virgin Islands, the Cayman Islands, and the Cook Islands, identifying over 100 people who benefit from these structures and more than 200 UK accountants, lawyers and other professional advisors who advise on setting up these structures; all these individuals and companies could be under scrutiny in the coming months.
HMRC’s advice is for those who use such schemes to review their tax arrangements and report any tax irregularities to them. It is clear that those who do not will run the risk of facing criminal investigation.