HMRC fraud team’s civil inquiries fall by half over five years

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Original article by Ed Siddons republished from The Bureau of Investigative Journalism under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

The number of civil tax avoidance leads looked into by HMRC’s Fraud Investigation Service has fallen by almost half in five years, while the number of civil cases it has formally opened has decreased by more than a quarter.

These figures, obtained by the Bureau of Investigative Journalism (TBIJ) under Freedom of Information laws, raise questions about the tax authority’s performance since the start of the pandemic.

The findings follow revelations by TBIJ and the Observer in September that prosecutions following HMRC investigations plummeted by two thirds in five years. TBIJ then revealed in January that HMRC has not charged a single company under a landmark 2017 law to clamp down on corporate tax evasion.

The new figures suggest that the tax authority’s civil enforcement has also declined alongside its use of criminal powers.

Margaret Hodge MP called on HMRC to “finally crack down on egregious tax avoidance and collect the revenues we desperately need”.

In the tax year of 2018/19, HMRC’s Fraud Investigation Service opened 37,273 “risks”, a term used to describe a preliminary inquiry into suspected error or false declaration. In 2022/23, that figure fell to just 21,338 – a 43% decline in five years.

The number of civil cases that were formally opened fell by 28% in the same period, from 17,424 to 12,585.

More from this projectJust 11 ‘wealthy’ people prosecuted for tax fraud last yearNot a single company charged with tax evasion under stronger HMRC powers

“The new revelations that HMRC is failing to make up for [declining numbers of criminal prosecutions] by undertaking more civil investigations is just disgraceful,” said Hodge. “These consecutive failures mean tax dodgers and their enablers can continue getting away scot-free.”

Stephen Daly, senior lecturer in corporate law at King’s College London, said: “[The number of] investigations has fallen off a cliff, and that can’t be good … If you don’t enforce the rules, then you create a culture in which people don’t have to worry about their tax returns later being checked.”

Civil inquiries and investigations declined sharply in 2020, when the Covid-19 pandemic interrupted HMRC’s enforcement activity. But despite a significant rise last year, the number of cases remains well below pre-pandemic levels. “If, in fact, this isn’t explained by Covid, then it’s unacceptable,” said Daly.

A HMRC spokesperson told TBIJ that figures relating to its Fraud Investigation Service “do not take account of our overall compliance activity”, including 300,000 interventions opened in 2022/23. They said the authority has recouped £136bn from compliance interventions since 2018/19.

Easy targets?

As well as the general decline in civil cases opened by HMRC’s fraud unit, the number opened by its team for investigating offshore, corporate and wealthy taxpayers has fallen especially steeply, by 56% in five years.

“Even when [HMRC is] opening civil cases, they appear to be going after the easier, lower value targets,” said Fiona Fernie, a partner at tax advisory firm Blick Rothenberg.

Last year, HMRC reached one of its highest ever tax settlements when former F1 mogul Bernie Ecclestone paid £650m after pleading guilty to tax fraud – but that success was “the exception, not the rule”, said Fernie.

Part of the problem is that the UK has an increasingly complex tax code, which makes enforcement action difficult, she said. “The staff are under considerable pressure, we get an increasingly complicated system every year, [and] it’s very difficult to get anybody to keep up with it.”

Robert Palmer, executive director of Tax Justice UK, said another issue was lack of resources. “We know HMRC is underfunded and resources have been diverted for work on Covid and Brexit,” he said.

HMRC estimates that it collects 95% of all the tax owed in the UK, a proportion it says has remained stable in recent years. However, it estimates that the remaining 5% still accounts for about £36bn.

“Parliamentary research shows that when the government invests in HMRC, the return on investment is significant. Until the department is properly funded, vast sums of money owed, often by the richest people and companies, will go unrecovered,” said Palmer.

The Public Accounts Committee last year found that for every £1 spent on compliance, HMRC recovers £18 in additional tax revenue. “The government is missing the opportunity to recover billions in lost revenue by not resourcing compliance,” it said.

Original article by Ed Siddons republished from The Bureau of Investigative Journalism under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Continue ReadingHMRC fraud team’s civil inquiries fall by half over five years

Zahawi’s tax evasions point to a more fundamental problem for the Tories

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https://morningstaronline.co.uk/article/e/zahawis-tax-evasions-point-more-fundamental-problem-tories

TORY chairman Nadhim Zahawi’s tax problems are a bigger headache for the Prime Minister than he has yet acknowledged.

Zahawi pleads that it was mere carelessness that saw him forced to pay HMRC nearly £5 million in unpaid tax (inclusive of a penalty) while he was, er, the Chancellor of the Exchequer.

Financial sloppiness isn’t a great look for a chancellor, but in Zahawi’s defence he’s admitted to it before. It was after all a “genuine mistake” that saw him claim thousands in expenses to heat the stables for a horse-riding school on his Warwickshire estate.

Labour rails at Conservative “corruption and cronyism,” but the fundamental issue is more basic still. This is a government of the rich, for the rich, by the rich and it is making us poorer.

https://morningstaronline.co.uk/article/e/zahawis-tax-evasions-point-more-fundamental-problem-tories

Continue ReadingZahawi’s tax evasions point to a more fundamental problem for the Tories

Nadhim Zahawi ‘agreed on penalty’ to settle tax bill worth millions

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https://www.theguardian.com/uk-news/2023/jan/20/nadhim-zahawi-agreed-on-penalty-to-settle-tax-bill-worth-millions

The Conservative party chair, Nadhim Zahawi, agreed to pay a penalty to HMRC as part of a seven-figure settlement over his tax affairs, the Guardian has been told.

The former chancellor, who still attends the cabinet, has been subject to extensive questions in parliament and the media in recent days after it emerged he agreed to pay millions to HMRC in December after a settlement with the tax agency.

The Guardian has now been told that the former chancellor paid a penalty imposed by HMRC – part of an estimated £5m tax bill.

Penalties are applied if someone does not pay the correct tax at the right time.

Asked repeatedly about the penalty, Zahawi’s spokesperson did not deny one had been paid. Nor did they offer any explanation or clarification about the sums involved.

https://www.theguardian.com/uk-news/2023/jan/20/nadhim-zahawi-agreed-on-penalty-to-settle-tax-bill-worth-millions

How I cost Nadhim Zahawi £3.7million

The former chancellor’s tax avoidance scheme, which has left his political career in the balance, was uncovered by an independent tax expert who Zahawi then tried to frustrate through legal means. Here’s how he did it

DAN NEIDLE

Continue ReadingNadhim Zahawi ‘agreed on penalty’ to settle tax bill worth millions

Cameron’s Pig Society :: Dodgy Banking, government supports tax evaders

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I’ve been looking at Cameron, Osborne & Co’s record on tax evasion. Tax avoiders and evaders are ennobled and joining the government, ideological opponents to tax appointed to senior HMRC posts, etc. There’s certainly the appearance that Cameron, Osborne & Co deliberately scupper EU agreements to tackle tax evasion to continue the status of the UK’s tax havens – that they work [ed: in the interests of for] that tiny elite, the super-rich tax evaders.

There’s a suggestion here that Cameron misled the House of Commons yesterday.

I’m still trying to get to grips with this issue. I certainly hope that the Labour Party are doing likewise. In the meantime, a vid about HMRC assisting UK tax evaders back in 2010/11 and ennoblement and appointment to government office.

10pm edit: I’m coming to the conclusion that Cameron, Osborne, Boris, etc – the Conservatives – are and represent the tax-evading super-rich. This is seen in Cameron’s statements and his government’s actions. The rich are asked to pay their taxes as opposed to telling them that they will be prosecuted and imprisoned for the serious crime of tax evasion. Cameron’s government maintain and support the UK’s tax havens. Cameron’s government promote tax evaders and avoiders to the Lords and bring them into his government. Individuals ideologically opposed to taxation are appointed posts in HMRC and HMRC investigators are reduced.

Continue ReadingCameron’s Pig Society :: Dodgy Banking, government supports tax evaders

Commentary on recent UK political events

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Hey Ho, Hey Ho …

 

How the Orange Bookers took over the Lib Dems


What Britain now has is a blueorange coalition, with the little-known Orange Book forming the core of current Lib Dem political thinking. To understand how this disreputable arrangement has come about, we need to examine the philosophy laid out in The Orange Book: Reclaiming Liberalism, edited by David Laws (now the Chief Secretary to the Treasury) and Paul Marshall. Particularly interesting are the contributions of the Lib Dems’ present leadership.

Published in 2004, the Orange Book marked the start of the slow decline of progressive values in the Lib Dems and the gradual abandonment of social market values. It also provided the ideological standpoint around which the party’s right wing was able to coalesce and begin their march to power in the Lib Dems. What is remarkable is the failure of former SDP and Labour elements to sound warning bells about the direction the party was taking. Former Labour ministers such as Shirley Williams and Tom McNally should be ashamed of their inaction.

Clegg and his Lib Dem supporters have much in common with David Cameron and his allies in their philosophical approach and with their social liberal solutions to society’s perceived ills. The Orange Book is predicated on an abiding belief in the free market’s ability to address issues such as public healthcare, pensions, environment, globalisation, social and agricultural policy, local government and prisons.

The Lib Dem leadership seems to sit very easily in the Tory-led coalition. This is an arranged marriage between partners of a similar background and belief. Even the Tory-Whig coalition of early 1780s, although its members were from the same class, at least had fundamental political differences. Now we see a Government made up of a single elite that has previously manifested itself as two separate political parties and which is divided more by subtle shades of opinion than any profound ideological difference.

 

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Commentary on and analysis of recent political events

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Today’s politics news …

Hinkley Point Nuclear Deal With EDF Faces Probe

An inquiry has been launched into whether a £16bn government deal with French energy giant EDF to build a nuclear plant in the UK meets EU rules.

Britain has agreed to subsidise the project to build two reactors at Hinkley Point C in Somerset, promising guaranteed power prices from the plant for 35 years.

The European Commission said it wanted the views of third parties because of the unprecedented nature and scale of the Hinkley deal.

It said it had “doubts that the project suffers from a genuine market failure” and it would assess whether the nuclear plant could in fact be built without government support.

Theresa May, citizenship and the power to make people stateless

Theresa May has already used her power to revoke citizenship to brutal effect. Now it is believed she wants to re-write the law so that she can make people stateless. The implications are worrying.

Now May is believed to be planning a dramatic expansion of her powers to revoke citizenship by rewriting the law so that she can issue orders even where it will make people stateless, which is currently illegal under the British Nationality Act, and even though Britain is a signatory to international treaties aimed at reducing statelessness.

This would put Britain in uncomfortable company, alongside nations such as Bahrain, which has been criticised by the UN’s High Commissioner for Human Rights for making dissidents stateless. In the US, the government is banned from removing the nationality of its citizens since a Supreme Court ruling in 1967, when judges ruled the US constitution did not allow for ‘fleeting citizenship, good at the moment it is acquired but subject to destruction by the Government at any time.’

HMRC ‘loses nerve’ chasing big firms, says MP

The UK tax authority “seems to lose its nerve” when chasing multinational companies for owed tax, the head of a committee of MPs has said.

Margaret Hodge, who chairs the Public Accounts Committee, said that the approach was firmer when HMRC was pursuing small businesses.

A report by the committee said HMRC failed to demonstrate it was on the side of people who paid tax in full.

The committee said that HMRC failed to use the full range of sanctions at its disposal to vigorously pursue all unpaid tax.

It said it should pursue prosecutions to test the boundaries of the law, the committee said, and had yet to test how existing tax law impacted on global internet-based companies.

“The lack of prosecutions against multinational corporations seems at odds with HMRC’s stance on pursuing tax debt from small and medium-sized businesses in the UK,” the committee said.

MI5/MI6 torture collusion report published: Politics live blog

Rolling coverage of all the day’s political developments as they happen, including the publication of the Gibson inquiry report into allegations that MI5 and MI6 colluded in torture, and Kenneth Clarke’s statement about it to parliament

Continue ReadingCommentary on and analysis of recent political events