The additional criminal investigations will require a significant increase in resources for HMRC, as those cases are more labour-intensive than ones worked under the civil code. Resources are also being increased for HMRC’s civil investigation work. HMRC is recruiting an additional 100 tax inspectors to its affluent unit, which scrutinises the tax affairs of about 300,000 people with incomes of more than £150,000 or wealth between £2.5m and £20m. This £2.5m threshold will be reduced to £1m when the new inspectors are recruited in April.
Individuals within those categories of taxpayer where HMRC has introduced special arrangements for dealing with unpaid tax – for example, lawyers, doctors, tradesmen and so on – will continue to be at more significant risk
The CPS announcement targeted dishonest tax-avoidance schemes. These are schemes where HMRC could take the view that that taxpayer has tried to evade tax. The blurring of the line by HMRC between evasion (illegal) and avoidance (legal) has increased in recent years. HMRC already has a number of individuals under criminal investigation for suspected tax evasion stemming from participation in avoidance schemes.
HMRC generally expect taxpayers who have engaged in a tax avoidance scheme to obtain detailed advice from an experienced professional. Even if HMRC does not consider that the scheme was illegal, it may nevertheless seek substantial penalties on any tax due. If the scheme involves offshore jurisdictions, the penalties could be as high as 200 per cent of the tax.
The CPS is giving a clear message: taxpayers with undeclared income or gains should approach HMRC before the inspector comes after them.
Taxpayers with irregularities currently have one option of guaranteeing immunity from prosecution for tax offences. The Liechtenstein disclosure facility was introduced in August 2009. Primarily intended for taxpayers with ‘hidden’ assets in Liechtenstein, the procedure is also available to taxpayers without an existing connection to that jurisdiction. The facility offers various benefits, depending on the taxpayer’s circumstances. A key benefit available to every taxpayer who qualifies for the facility is immunity from prosecution for tax offences. Immunity will apply unless the taxpayer is involved in wider criminality, such as bribery or perjury.
Taxpayers can voluntarily approach HMRC for immunity from criminal investigation under the contractual disclosure facility. HMRC does not guarantee that it will grant such a request, and taxpayers would particularly be at risk of not being offered the contractual disclosure facility where, for example, they were in a position of trust or responsibility, or had committed previous offences. The Liechtenstein disclosure facility does not provide any such restrictions.