More dawn raids on tax evaders as HMRC ramps up action

Added 8th August 2017

Dawn raids on suspected tax evaders by UK authorities are up by a third to 669 over the five years to March, as HM Revenue & Customs steps up its pursuit of white-collar fraudsters, reports the Financial Times.

More dawn raids on tax evaders as HMRC ramps up action

Over the same five-year period, the number of evasion-related prosecutions more than doubled to 1,067 from 501.

Jason Collins, head of tax at law firm Pinsent Masons, said dawn raids, which involve early morning searches on premises of suspected tax fraudsters, were a vital way for HMRC to get hold of crucial evidence.

He said: “By raiding premises, HMRC not only hopes to be able to seize the proof it needs to build its case, but also to clearly show strength and intent which should act as a deterrent to others.”

Early bird

Typically, HMRC officers will swoop on premises early in the morning, giving rise to the term “dawn raid”.

Examples include the high-profile raids on Newcastle United and West Ham United in April that were part of a cross-border investigation into the tax affairs of leading football clubs.

However, the UK taxman later faced claims that its raid on Newcastle Utd was unlawful, after the club applied for permission to seek a judicial review of the search-and-seize order used by HMRC.

Tougher action

HMRC’s focus on tax evasion has sharpened following repeated calls from MPs for tougher action, who said that the small number of prosecutions for offshore evasion “creates the impression that the rich can get away with tax fraud”.

In 2015, HMRC was given a target to triple the number of criminal investigations into “serious and complex” tax crimes to 100 by 2020, particularly those involving wealthy individuals and corporations.

Once HMRC has been granted a search warrant by a magistrate, it can use a dawn raid to seize personal documents, emails and electronic files from individuals as evidence to secure prosecutions for tax evasion.

Another surge

Pinsent Masons said the number of dawn raids might increase again after the introduction of a new corporate criminal offence of failure to prevent the facilitation of tax evasion at the end of September.

The measure will enable HMRC to prosecute companies and partnerships that fail to prevent staff from engaging in or encouraging tax evasion.

Collins said: “Banks and professional services companies have a high risk of their staff or agents being involved in tax evasion, because of the large amount of capital handled by them. However, the new offence applies to all sectors, and all companies should be aware of how they may be affected.”

Figures released in response to a question from MPs showed that while decisions to prosecute had more than doubled over five years, there was smaller increase in the number of convictions that rose to 768 from 401 over the period.

The ratio of acquittals to convictions over the period rose from 7.7% to 10% over five years.

 

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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