Tax 

HMRC dawn raids increase by third in last five years

HMRC dawn raids increase by third in last five years

The number of property raids carried out by HM Revenue & Customs as part of its clampdown on white collar tax evasion has risen by 34 per cent over the last five years, according to figures obtained by Pinsent Masons.

Dawn raids increased from 499 to 2011 to 2012 to 1,563 property raids in total last year, up by 8 per cent from 2015 to 2016.

"HMRC has shown it is not afraid to come down hard on large corporates they suspect of tax evasion - and, obviously, the reputational impact of dawn raids can be devastating," said tax expert Jason Collins of Pinsent Masons in an article on the firm's website.

"The new offence means HMRC will be investigating how businesses, or their employees, might be assisting or encouraging tax non-compliance by their business partners, customers, contractors and suppliers.

"Therefore, there may be an increase in raids after it becomes operational this September," he said.

All businesses, but particularly the banks and professional services firms at particular risk of falling foul of the new offences, should refresh their raids and critical incident procedures and seek professional advice in order to know what to do in case HMRC officers appear without warning, Mr Collins said.

From 30 September, it will be a criminal offence in the UK if a business fails to prevent its employees or any person associated with it from facilitating tax evasion.

The new offences, which will apply to both companies and partnerships, will effectively make businesses vicariously liable for the criminal acts of their employees and other 'associated' persons, even if the senior management of the business was not involved or aware of what was going on.

The Criminal Finances Act introduces two new criminal offences.

The first will apply to all businesses, wherever located, in respect of the facilitation of UK tax evasion.

The second will apply to businesses with a UK connection in respect of the facilitation of non-UK tax evasion.

Businesses will have a defence if they can prove that they had reasonable prevention procedures in place to prevent the facilitation of tax evasion, or that it was not reasonable in the circumstances to expect there to be procedures in place.

Dawn raids are enormously useful to HMRC, which can use its legal powers to seize personal documents, emails and electronic files from individuals for evidence to secure prosecutions for tax evasion.

HMRC does not, however, have the power to enter business or residential premises without a search warrant, which must be granted by a magistrate.

Despite the long-term increase in the total number of dawn raids conducted by HMRC, the figures obtained by Pinsent Masons also showed a 12 per cent drop in raids relating to 'white collar' tax evasion last year, down from 761 in 2015 to 669 in 2016.

However, this drop was less likely to indicate a slowdown in activity than "a move towards starting criminal investigations without undertaking a raid", Mr Collins said.

"HMRC are starting to apply for production orders instead, to get the documents they need," he said.

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