Rishi Sunak quizzed by Neil on increases in tax
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HMRC has an Offshore, Corporate and Wealthy (OCW) Unit which, according to the Government’s latest figures, has convictions totalling 67 years of prison time for tax evaders last year. This is nearly triple the total of just 23 years secured a year earlier, according to analysis from Pinsent Masons, the international law firm.
Pinsent Masons detailed the increase in prison sentences is a sign that HMRC’s strategy of using targeted criminal investigations, rather than just civil penalties, as a powerful deterrent to address deliberate conduct including professional enabling and tax evasion by high net worth and ultra-high net worth individuals is bearing fruit.
The OCW was established in the wake of the “Panama Papers” scandal in 2016 to investigate serious non-compliance by businesses and the wealthiest taxpayers.
The sentencing secured in respect of the unit’s casework will reflect the fact that where you have wealthy “white collar” evaders, significant sums of money, or breaches of positions of trust are likely to be in play.
Andrew Sackey, a Partner at Pinsent Masons, commented:” HMRC is proving that wealthy tax evaders who engage in deliberate dishonesty at the expense of the tax man don’t just get fines – they go to prison.
HMRC is cracking down on tax evasion (Image: GETTY)
“The perception that wealthy people who evade tax only get financial penalties is increasingly untrue.
“The Offshore, Corporate and Wealthy 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.”
While many may assume they’ll be outside of HMRCs field of vision, Pinsent Masons warned the current threshold for wealthy individuals to be investigated by HMRC’s specialist OCW unit is lower than many might expect.
Pinsent Masons explained anyone with an income of over £200,000 per year falls within its terms of reference.
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Mr Sackey concluded: “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 ultra-high net worth 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.”
Coronavirus halted tax investigations (Image: EXPRESS)
On top of these high profile investigations, UHY Hacker Young Group, the accountancy network, recently found that HMRC was ramping up its regular tax investigations.
Recent data published by HMRC showed it opened 102,000 compliance investigations in Q1 2021, up 36 percent from 75,000 in the previous quarter.
This was almost quadruple the low of just 27,000 in the second quarter of 2020.
Additionally, the amount of extra revenue HMRC brought in from its compliance activity jumped 29 percent to £14.2billion in Q1 2021, an increase from £11billion in the same period in 2020.
Graham Boar, a Partner at UHY Hacker Young, commented on these figures.
Mr Boar said: “HMRC is turning its focus back to tax investigations. The pandemic has left it with a lot of catching up to do.
“HMRC’s resources have been stretched during the pandemic, while it has also taken a more lenient approach towards taxpayers. That now appears to be ending.
“Taxpayers with skeletons in the closet should be aware that they are at risk of investigations, fines and even prison sentences. It would be favourable for individuals with unpaid tax to approach HMRC first before they come knocking.”