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Need for evidence causes HMRC to ramp up property raids

New corporate offence of ‘failing to prevent’ tax evasion could fuel upward trend further, says expert

26 September 2016

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In a bid to strength its criminal investigations into tax evasion, HMRC is continuing to ramp up its raids on properties, searching 761 properties in the last year.

The rise represents a 28 per cent increase on 2014/15 when the revenue conducted 593 raids. According to figures provided by Pinsent Masons, this is a 53 per cent increase on five years ago when HMRC conducted 499 property searches.

The continued rise comes as HMRC is under pressure to increase the number of successful prosecutions for tax evasion. The revenue has even been granted extra resources to enable it to pursue more cases.

HMRC now has the power to raid premises and seize evidence with a search warrant granted by a judge or magistrate. Individuals at the property can also be searched and personal documents, emails, and other electronic files can be taken.

Lawyers at Pinsent Masons said this upward trend showed no signs of slowing, as HMRC is treating what was previously seen as aggressive tax avoidance as tax evasion.

Paul Noble, tax director at the firm, said: ‘Criminal prosecutions for tax evasion can be notoriously difficult to bring to court, so raiding property is a vital way for HMRC to get hold of the crucial evidence it needs.

‘HMRC is taking greater advantage of these powers as a shock and awe tactic. By raiding premises, it not only hopes to be able to seize the proof it needs to build its case, it’s also a clear show of strength and intent which should act as a deterrent to others.

‘As the distinction between aggressive tax avoidance and tax evasion becomes increasingly blurred in HMRC’s eyes, it’s likely to rely increasingly heavily on evidence gathered from premises searches.’

Noble added that the forthcoming corporate offence holding companies criminally responsible if they fail to prevent their staff, contractors, or other agents from facilitating tax evasion could also lead to more raids being carried out. The government is currently reviewing responses to its consultation on the draft legislation and guidance.

‘The new corporate offence will add another dimension. Companies will be a target in themselves in terms of what they knew about suspected criminal activity by those working for them and what they did or didn’t do to prevent it,’ he said.

‘This could require investigators to trawl through masses of documents, which they will need to time to identify and ring-fence before they can sift through the evidence. For businesses and individuals this is likely to be a very intrusive and disruptive process, but one which HMRC appears to see as increasingly necessary.’

In addition, last year’s multi-jurisdictional agreement, signed by more than 50 countries to exchange tax information, will allow HMRC to gather more information on taxpayers and use such data to apply for search warrants of suspected tax evaders.

‘With more information sharing between multiple jurisdictions now on the horizon, HMRC is going to be able to make an even stronger case for being granted search warrants in more cases,’ said Noble. ‘As ever increased powers and their use bring responsibilities to ensure that they are applied fairly and correctly.’

Categorised in:

Tax & Wealth structuring White collar crime

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Pinsent Masons HMRC Tax evasion