Serious evasion cases surge 18%, as more prosecutions loom

Contractors have been cited by a tax advisory trying to fathom an almost 20% jump in the number of serious evasion cases -- which it says are bound to escalate even further.

Pinsent Masons says the Criminal Finance Act 2017 which it explained requires companies to ‘prevent their contractors from facilitating evasion,’ is one of HMRC’s many new weapons.

Alongside data HMRC receives under the Common Reporting Standard -- also in force since September, the offence has helped swell total cases to 3,809, up from 3,216 in 2016/17.

But CRS’s forerunner has helped HMRC too, as similar data on UK taxpayers with offshore accounts has been sent in by the Crown Dependencies and Overseas Territories since 2016.

This already strong ability of HMRC to identify ‘serious’ tax evasion cases (those worth £50,000 or where prosecution is possible), is predicted by the tax advisory to improve further.

The next CRS wave including Hong Kong and the UAE comes on stream in September 2018; aside to a mandatory disclosure regime for intermediaries, and the strict liability offence.

“We are likely to see even more prosecutions in the future”, says Pinsent Masons partner Jason Collins.

“[The new strict liability offence] makes it a criminal offence to fail to declare offshore income of more than £25,000 and means that HMRC does not have to prove intent”.

Meanwhile, under the disclosure regime, EU member states will automatically share any data they receive, with the disclosure requirement covering tax advisers and their clients, among others.

“Both HMRC’s local offices and its specialist directorates are on the lookout for any transaction out of the ordinary”, Mr Collins said.

“The increase in serious tax evasion cases identified partly reflects HMRC’s hardening stance towards tax evasion in the face of growing political pressure.”

He added that under the corporate anti-evasion offence, which HMRC has investigated contractor recruitment agencies under, businesses do have a defence.

Specifically, they must be able to demonstrate that they had “reasonable prevention procedures in place”. But if they cannot, it will not just be individuals in the dock.

“When HMRC finds an individual evading tax, it will be looking to see if it can get a business on the hook for the corporate criminal offence,” Mr Collins said.

“Prosecuting a business will send a very strong message to businesses to clean up their act. Any business which has not got appropriate procedures and policies in place is at risk."

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