Serious tax evasion reports fall to five-year low

Tax protester with banner There have been protests against large corporations' tax affairs

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Cases of serious tax evasion reported by local tax offices are at their lowest level in the last five years, according to law firm Pinsent Masons.

HM Revenue and Customs (HMRC) defines tax evasion as "serious" when the sum involved is higher than £50,000 or it is worthy of prosecution.

Serious cases identified by local HMRC offices fell 16% between the two most recent tax years.

The report comes as governments have vowed to cut corporate tax evasion.

HMRC's local offices reported 2,888 suspected cases of tax evasion, down from 3,456 in the previous 12 months, it said.

However, this is only one avenue used to highlight and report tax evasion.

Specialist teams, and campaigns to disclose offshore cases could also pinpoint evasion cases.

As a result, the law firm was unable to conclude whether evasion as a whole was rising or falling.

It said that HMRC has stepped up its anti-evasion efforts considerably in recent years, including having new powers, such as being able to impose penalties of up to 200% of the original tax owed if an individual does not declare any income or capital gains that has been hidden from HMRC in an offshore bank account.


There have been threats of more focus being placed on prosecutions for evasion, and there was a suggestion that this could be preventing some evasion that might have taken place otherwise.

"This decline in suspected tax evasion doesn't tally with the rhetoric from some quarters that the British economy is being undermined by a chronic under-collection of tax revenues," said Phil Berwick, a partner at the law firm.

"HMRC has plenty of tools at its disposal to catch tax evaders which serves as a huge deterrent to those considering tax evasion."

Pinsent Masons advises clients who may face investigations into their tax affairs by HMRC. Mr Berwick admitted that by the very fact of its secretive nature, it is almost impossible to quantify the total amount lost to tax evasion.

Last week, the G8 major economies agreed new measures to clamp down on money launderers, illegal tax evaders and corporate tax avoiders.

And on Sunday, US coffee giant Starbucks said it has paid £5m in UK corporation tax - its first such tax payment since 2009. It announced late last year it would pay more corporation tax after a public outcry and an investigation by MPs.

Starbucks has only reported taxable profit once in 15 years in the UK.

"International co-operation has been stepped up significantly as HMRC has striven to curb tax evasion," Mr Berwick added.

"Tax evaders are now realising that HMRC has a much greater ability to tackle evasion, even if individuals conceal their assets abroad."

HMRC said that the tax gap - which calculates uncollected tax - had remained broadly the same for the last few years.

"These figures represent only one channel to identifying tax evasion. Following a review of our referral process, our investigations are now better targeted resulting in an increase in the number of successful prosecutions," said a spokesman for HMRC.

"Where we find someone not playing by the rules we will take action to prosecute."

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