HM Revenue & Customs’ elite Offshore, Corporate and Wealthy (OCW) unit secured convictions totalling 67 years of prison time for tax evaders in the 12 months ending 31 March 2021.
The convictions are nearly three times higher than in the previous year where prison time totalled 23 years, according to research by Pinsent Masons.
The law firm said that the increase in custodial sentences is mostly due to HMRC’s strategy of using criminal investigations, rather than just civil fines, to deter ultra-high net worths (UHNWs) and high net worths (HNWs) from evading tax.
The OCW unit, part of the Fraud Investigation Service, was set up in 2016 in the aftermath of the Panama Papers scandal to investigate serious non-compliance by businesses and the wealthiest taxpayers.
Andrew Sackey, partner at Pinsent Masons, said: “HMRC is proving that wealthy tax evaders who engage in deliberate dishonesty at the expense of the taxman don’t just get fines – they go to prison.
“The perception that wealthy people who evade tax only get financial penalties is increasingly untrue. The OCW unit is now regularly completing painstaking criminal investigations of the most complex and serious forms of tax evasion, resulting in convictions and significant prison time.”
HMRC’s ‘most powerful weapon’
Pinsent Masons added that the stark increase in prison time for tax evaders is a result of the taxman persuading the UK courts to punish guilty wealthy people with “deterrent custodial sentences”.
The law firm also discovered that the average prison term increased last year to an average of two years and 11 months, up from two years and one month in 2015-16.
The current threshold for UHNWs and HNWs to be investigated by the OWC unit is lower than people may think, Pinsent Masons said, as anyone with an income over £200,000 ($271,103, €231,802) falls within its remit.
Sackey added: “Prison sentences are the most powerful weapon in HMRC’s arsenal, they impact not just on the evader but their families who have to live with the consequences of convictions, and often tax assessments and confiscation proceedings.
“Not only do they punish the most serious tax evaders, they act as an effective deterrent to many others considering that course.
“It is not only UHNW individuals who are being investigated by the OCW unit. The £200,000 income threshold means that a large number of people are within its purview.
“High-earning white collar professionals who engage in tax evasion should be concerned about the potential of the OCW unit investigating them and, where they find evidence of dishonesty, pursuing a criminal investigation and custodial sentence.”
