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More than 250 high net worth clients referred to HMRC’s specialist tax evasion team last year

More than 250 high net worth clients were referred to HMRC’s specialist tax evasion referral team last year, as HMRC’s crackdown on tax avoidance and evasion continues at pace. Any client referred to this team can expect a full investigation to shortly follow.
The tax evasion referral teams looks at cases to determine whether a civil investigation should be launched or if there is scope for a criminal referral to HMRC’s Fraud Investigation Service. This decision is critical as the outcome of each investigation could be very different.
So, what does this large, increasing number of referrals tell us? The fact that HMRC is able to refer this many cases to specialist teams means they clearly have plenty of leads to investigate at the present moment.
Given HMRC’s current focus and the speed at which they are now referring individuals to specialist investigation teams, high net worth clients with income from foreign assets should take time to review their affairs. It is vital to do this to ensure that there is nothing irregular that appears, however innocent or otherwise.
In a civil investigation, HMRC looks to recover any tax owed along with interest and financial penalties, which can be up to 200% of the tax due. A criminal investigation will not just look to recover the tax, interest and penalties owed but the investigation team may also look to secure a criminal prosecution, potentially ending up with a prison sentence.
One area of high net worth clients’ tax affairs HMRC has been looking at particularly closely is any undeclared income from offshore assets.
HMRC’s activity has prompted more taxpayers to come forward to declare income in order to avoid being investigated. For example, rental income from overseas property declared by UK taxpayers rose 17% to £912m last year, up from £781m in 2018/19.
23 of the UK’s 2,100 largest businesses were also referred to HRMC’s tax evasion referral team last year. The fact that 1% of the UK’s largest corporations were referred for investigation in just one year is highly significant and further evidence of the tough stance HMRC is taking towards big business.
The powers that HMRC has gained in recent years have made it easier to investigate large businesses. If HMRC now finds that an employee or agent of a business helped to facilitate tax evasion, then a business can face an investigation and unlimited fines.
Thinking back to the last global financial crisis in 2008, we can recall that HMRC was set aggressive targets to collect extra tax through a greater number of investigations. This led to five times as many criminal prosecutions for tax evasion in the following years.
Big businesses now need to be aware that there may now be similar pressure being put on HMRC in the coming months as the government looks to increase tax receipts. Both high net worth and large business clients should therefore take note.

Tax investigations can be very stressful and costly for those involved. PfP are specialists in this area and you can protect your clients against the cost of most tax investigations by offering a Tax Investigation Service. To find out how we can help, contact