Serious tax evasion HMRC investigations up 18%

The figures are out there: serious tax evasion cases are up by 18% during the year ended 31 March 2018 compared to the previous year but why? Here, we look at the bigger picture and question the potential variables that may have contributed to this recent growth.
HM Revenue and Customs (HMRC) conducts such cases using its Code of Practice 9 (COP9) Contractual Disclosure Facility (CDF) powers. The COP9 CDF process gives taxpayers an opportunity to make a full disclosure and regularise their tax affairs with the guarantee of immunity from criminal prosecution.
It has been claimed by some commentators that the 18% increase was driven by the information HMRC has received under the Common Reporting Standard (CRS). We feel, however, inclined to look at the bigger picture and at least question the potential variables that could have contributed to such an increase. 
If, on one hand, the increase of COP9 CDF cases might have been led by HMRC’s rolling crackdown in tackling tax evasion, including the information received under the CRS, on the other hand, it seems at least reasonable to question whether part of the 18% rise is due to taxpayers electing to make voluntary disclosures (whether unprompted or prompted by HMRC) through the COP9 CDF process. 
Until 30 September 2018, HMRC’s Worldwide Disclosure Facility (WDF) allows taxpayers to disclose irregularities in respect of offshore income, assets or gains. However, unlike the COP9 CDF process, the WDF does not guarantee immunity from criminal prosecution. 
Any person who has knowingly and deliberately evaded UK tax in respect of offshore income, assets or gains and wishes to make a voluntary disclosure should think very carefully about the right disclosure process for them. Alarmingly, HMRC is not averse to criminally investigating taxpayers whom are seeking to disclose irregularities and settle their tax affairs on a civil basis. HMRC is under pressure to crack down on offshore ‘wealthy’ taxpayers and has challenging prosecution targets to meet, so specialist advice must be sought about the most appropriate disclosure process to minimise any potential prosecution. In certain circumstances, HMRC’s COP9 CDF would be the more suitable one. 
So, one could argue that whenever possible, both taxpayers and advisers would feel a lot more inclined to disclose tax irregularities arising from deliberate behaviour using the COP9 CDF (taxpayers must disclose at least one ‘deliberate’ error), than through other disclosure facilities that would not offer them the same protection. 
This being the case, it would be interesting to find out how many of these new tax evasion cases were actually in relation to taxpayers requests to make voluntary disclosures in relation to offshore issues using the COP9 CDF route and how many were prompted by HMRC and directly linked to the CRS.
Some food for thought…  

For more information or advice please contact:

Mark Taylor
Head of Tax Investigations and Dispute Resolution
T | +44 (0)20 7556 1243
E |
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