Serious tax evasion cases take a surprising dip

Added 24th September 2012

The number of serious tax evasion cases identified by HM Revenue & Customs has fallen by almost a quarter in the past year, according to Pinsent Masons, the international law firm.

Serious tax evasion cases take a surprising dip

In 2011-12 there were 3,456 suspected serious tax evasion cases identified by local HMRC offices,  down 23% on the 4,506 cases identified in 2010-11.

Pinsent Masons said that this is the lowest number of serious tax evasion cases identified by HMRC’s offices in the last five years, calling into question the popular perception that tax evasion is rising relentlessly.

The fall in number of serious tax evasion cases identified by HMRC is unlikely to be because HMRC is either becoming less active or less effective in its pursuit of tax evasion, according to the lawyers.

Recent research by Pinsent Masons found that HMRC has stepped up its offensive against tax crime by more than doubling the number of property raids it undertakes from 196 in the 2010-11 tax year, to 499 in 2011-12.

Phil Berwick, director at Pinsent Masons, said: “Public concern over tax evasion and tax avoidance has reached fever pitch, but these figures show the level of outcry and language used by some is not entirely justified.”

“A significant fall in the number of cases identified by HMRC’s local offices doesn’t really gel with the idea that there is a substantial and growing threat to public spending because of tax evasion.”

Berwick said that talking up the risks of tax evasion and avoidance does make it easier for HMRC to accrue more wide ranging powers to undertake investigations or to overturn the way in which businesses or individuals arrange their tax affairs.

“For example, the proposed General Anti-Abuse Rule, that HMRC wants to introduce, hands over substantial new powers to the taxman to act as judge and jury on legitimate tax planning by UK businesses. HMRC would find it far harder build up such an arsenal of tools if it weren’t for the backdrop of stories about avoidance and evasion.”

“Some of the other powers HMRC has are already very tough, such as entering business premises without warning, and arresting suspects without the presence of police officers.”

Berwick said that HMRC is becoming more draconian in its punishment of offenders it successfully identifies. Earlier this year, HMRC pursued criminal action against Melvyn Careswell, a Surrey plumber who evaded £50,000 of income tax.

“The Melvyn Careswell case is a perfect example of HMRC’s current attitude to the prosecution of tax evasion cases. A few years ago, a £50,000 tax evasion case would almost certainly have been subject to civil, rather than criminal prosecution.”

“HMRC is now prepared to use its strongest anti-evasion measures in cases that would previously have been regarded as quite modest in size.”

A serious tax evasion case is defined by HMRC as one involving the evasion of more than £50,000 in tax, or where prosecution is possible.

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Mark Battersby

Editor, International Adviser

International Adviser

Mark Battersby is editor of International Adviser. He is also programme director for International Adviser events in strategic expat locations around the world, and its flagship FundLinks conference in London. Mark joined Last Word Media in February 2012, having previously worked at Citywire, Interactive Investor International, and FT Business.

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