An Overview Of HMRC's Approach To Tax Fraud

Published date14 September 2020
Subject MatterTax, Criminal Law, Coronavirus (COVID-19), Tax Authorities, White Collar Crime, Anti-Corruption & Fraud, Reporting and Compliance, Financing
Law FirmBCL Solicitors LLP
AuthorMr Harry Travers, Greg Mailer and Umar Azmeh

Harry Travers, Greg Mailer and Umar Azmeh review HMRC's approach and argue that its failure to produce meaningful statistics should not mask the fact that it is criminally prosecuting low-hanging fruit.

Introduction

In common with all other areas, the overwhelming focus of the industry this year has related to the impact of the Covid-19 pandemic. In April 2020, HMRC announced that it would largely suspend tax avoidance investigations, partly to allow its investigators to focus on managing the government Coronavirus Job Retention Scheme (the furlough scheme), along with dealing with taxpayers who needed additional time to settle outstanding tax bills. As a result of the Covid-19 pandemic, income to the Exchequer has been hugely reduced due to a combination of unemployment, tax deferrals, and the absence of penalties resulting from investigations. By the middle of the year, UK tax receipts had decreased by approximately 50% at the same time as the budget deficit rose from a forecasted '55bn to a record '370bn. In June 2020, HMRC announced that it would be resuming its investigations.

Over the last fifteen years the tax gap has been steadily closing, falling from 7.5% in 2005/6 to a record low 4.7% in 2018/19, when more than 95% of tax due was paid. However, this downward trend will clearly be halted by the Covid-19 pandemic. Accordingly, it is highly likely that the next year will see HMRC significantly intensify its focus on tax avoidance and evasion in order to close the huge gap in the public finances. It is anticipated that there will be an increase in profitable settlements, particularly under the Contractual Disclosure Facility ('CDF')/Code of Practice 9 ('COP9'). Additionally, it is inevitable that HMRC's criminal investigation teams will be required to address the criminal activity that will no doubt flow from the Covid-19 pandemic itself. For example, HMRC has set up an online facility for the public to report suspected abuse of the Job Retention Scheme, in respect of which HMRC's CEO Jim Harra expressed concerns about the potential for fraud. The next year will almost certainly see a consequent increase in tax enquiries and reviews, followed by criminal investigations, COP9 enquiries and prosecutions.

HMRC Process and Procedure

In the meantime, the Covid-19 pandemic has also impacted upon a number of proposed tax measures, including a power evaluation exercise which was due to take place during 2020. In December 2018, the House of Lords published a report into HMRC's powers, titled "Treating Taxpayers Fairly". In response to that report, in mid-2019, HMRC published a written statement regarding its powers and taxpayer safeguards. It expressed a wish...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT