On 8 November the Chancellor, Philip Hammond, announced that criminal and civil investigations had been launched into 22 individuals following an investigation by the Panama Papers Task Force led by HMRC and the National Crime Agency.
Mr Hammond also said that another 43 high net worth individuals had been placed under special review while their links to Panama are investigated.
This statement comes shortly after the publication of a report from the National Audit Office, which evaluates HMRC’s specialist High Net Worth Unit, a team devoted to analysing the tax affairs of the UK’s 6,500 wealthiest people.
It is likely that this is the unit working alongside the Task Force evaluating how to proceed against those 43 high net worth individuals facing further scrutiny due to their links to the Panama Papers.
The National Audit Office reports that where suspected tax evasion by a high net worth individual is discovered by the unit, the person is referred to HMRC’s Fraud Investigation Service.
Since 2009, 70 investigations were closed by the Fraud Investigation Service, of which only two were referred to the Crown Prosecution Service.
Only one of these referrals proceeded to prosecution – see below. The other did not because the CPS determined that ultimately there was not a reasonable prospect of conviction.
This sole prosecution, of the property developer Michael Shanly in 2012, resulted in a conviction.
A millionaire property developer from Berkshire will pay £469,444 in fines and costs for failing to pay tax on money hidden in a Swiss bank account. Michael Shanly was prosecuted at Woodford Green Crown Court and pleaded guilty to tax evasion worth £430,000. He had already voluntarily paid £387,103 to HM Revenue and Customs, bringing the total to £856,547. The conviction is the first for the HMRC’s special unit tracking down offshore tax dodgers. Last year, it wrote to 1,000 of 6,000 UK citizens who had been exposed for hiding bank accounts in Geneva in Switzerland. HMRC first acquired the list of wealthy individuals, with accounts at the Swiss division of HSBC, in 2010. The list was stolen by an employee of the bank. It was then passed to the UK taxman by the French authorities after the HSBC employee had fled to that country. “Shanly, who features on the Sunday Times Rich List, opened the account with his and his mother’s money,” HMRC said. “When his mother died, he later closed the account, and transferred all the money – avoiding £430,000 inheritance tax. “He thought it was out of reach of HMRC and hoped we would never find it. However, we discovered it, and he will pay a heavy penalty,” HMRC added. Mr Shanly’s solicitor said the money that was transferred in 2008 was his mother’s money and went to a children’s charity in Switzerland, not to his client personally. Mr Shanly’s companies had previously had to pay £1.5m in back taxes in 2008. http://bbc.in/2g2i7lo
It is difficult to draw any meaningful conclusions from these figures.
One conviction following 70 investigations may indicate that the original suspicions were groundless. However, it is more likely to be a consequence of HMRC’s policy of preferring to recoup revenue through penalties and interest via civil settlement, rather than seek a prosecution.
A key reason why this policy is the likely explanation, is that investigating to the sufficient standard to launch a criminal prosecution is expensive and HMRC’s principal function is raising revenue.
HMRC’s own guidance confirms that prosecutions are reserved for the most egregious cases where a deterrent is required.
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