In a comprehensive and often hostile hearing on 28 October, Margaret Hodge, chair of the Public Accounts Committee, questioned why none of the criminal cases that Edward Troup, HMRC’s tax assurance commissioner, described as “in train” at a 2012 hearing had been brought to court.
Mr Troup disagreed with Ms Hodge’s assertion that the cases had been seen by the Crown Prosecution Service, saying that the evidence did not meet the CPS criteria in all cases.
He said: “Parliament has given us two means of pursuing tax fraud: one is civil investigation of fraud procedures and the other is criminal prosecution. The second option is not the most effective way to maximise tax.”
Jennie Granger, director of general enforcement and compliance at HMRC, said: “Prosecution is used as a deterrent, but it is not the main part of our toolkit. Our priority is to get taxpaying back on track and get that money back to the taxpayer.”
Jim Harra, director of general enforcement and compliance at HMRC, said the General Anti-Abuse Rule (GAAR) had already seen advisers, clients and companies “adjusting their behaviour” in expectation of tougher rules on non-mainstream tax schemes.
Ms Hodge also attacked the new CFC regime, citing criticism from the OECD over its “weakened” powers to avoid companies shifting profits to tax havens.
“We have to find a way to tax companies in the UK and not drive business overseas,” responded Mr Troup, “but it cannot achieve exactly all the effects we want.”
Mr Troup also said it is “extremely difficult to build an accurate picture” of due tax left in Swiss bank accounts, after Ms Hodge queried the chancellor’s target figure of £3.12bn.
Jason McGuigan, director of financial planning for Oxford-based Critchleys, said: “Advisers are more apprehensive about non-mainstream schemes following GAAR. But it depends on what you define as a ‘tax-efficient scheme’; an Isa is a tax-efficient scheme.”