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Guest post: A new report into HMRC’s investigation of tax fraud by the wealthy

Overnight the Public Accounts Committee published a timely report on ‘Tackling Tax Fraud’. It’s fairly short and you can read it here.

Prospectively the greatest point of interest in the report is when it addresses the ‘perception that HMRC does not tackle tax fraud by the wealthy.’

There are, of course, two questions buried in that phrase.

Is HMRC failing to do enough to tackle tax fraud by the wealthy? And, is HMRC allowing to grow up in the minds of the public a perception that it is failing to do enough to tackle tax fraud by the wealthy?

Only one of the questions raises a matter of fundamental public importance: are rich and poor treated meaningfully equally under the law. The other concerns whether HMRC should sack its press agency.

And I said ‘prospectively the greatest point of interest’ because the report in good part addresses the second question. I don’t think I care – do you? But, anyway, it concludes that HMRC should ‘publicise this work’

Now we’ve got that out of the way, what do we learn about the important question.

We can glean one or two details of interest.


See if you can spot where the forensic point slides away from the committee here:

HMRC told us it investigates around 35 wealthy individuals for tax evasion each year, but did not know how many wealthy individuals it had successfully prosecuted. We welcome the fact that HMRC has sought and received funding to increase the number of investigations it undertakes into corporates and wealthy individuals to 100 a year by 2020, indicating that the current level is insufficient.

Yep. There is apparently going to be an increase in funding to move from 35 to 100 investigations a year. But that increase will not only cover wealthy individuals but will also cover corporates.

I was curious about how this point had been allowed to slip so I went back to the oral evidence session which stood as the basis for this report. That didn’t help so I went back to the National Audit Office report which had been addressed in the oral evidence session. As I read those documents, HMRC has never stated that it investigates 35 wealthy individuals a year or that it is now going to investigate 100. Both of those numbers cover both wealthy individuals and corporates.

But at least there is more resource to tackle a group that includes wealthy individuals. Even if we don’t know how that resource is targeted within that group.

Maybe. Here’s the oral evidence session again.

Q147 Stephen Phillips: In one sense, Ms Granger, you have anticipated my question. You are going to increase the number of prosecutions, or investigations that hopefully lead to prosecutions, to 100 for wealthy individuals and corporates from a figure that is currently around 35. Is that right?

Jennie Granger: I think “wealthy and complex” is what we said—

So that number for evasion investigations – and the increase from 35 to 100 – covers (a) wealthy individuals (b) wealthy corporates (c) complex individuals (d) complex corporates.


But forget about investigations for a second. What about prosecutions? How many wealthy individuals face the threat of jail time? Here I go back to the report. And on this it is crisp. HMRC did not know how many prosecutions it had brought of wealthy individuals for tax evasion (see paragraph 10).

What we do know (according to the National Audit Office) is that increasing HMRC’s overall target for criminal prosecutions to 1,000 led it:

to focus on less complex cases, in particular a large number of prosecutions for evading income tax, VAT and tobacco duty, and lower-value cases.

We also know HMRC had estimated that many billions of pounds of tax were being evaded offshore. Many billions were expected to be collected under a number of long-running tax amnesties – but the number of billions actually collected fell very short.

And we know, because the report reminds us, that the 3,600 names on the HSBC Falciani list of those with Swiss Bank accounts led to only one prosecution. And that fact led to widespread public outrage.

Did this shortfall, did this outrage precipitate some change of focus in HMRC’s activities? It’s not easy, on the basis of the Public Accounts Committee report at least, to conclude that it did.

Did it prompt decisive re-resourcing of HMRC to enable that change of focus? We know from the OBR (see paragraph A.23) that HMRC very recently still lacked the resource to chase up an £800m shortfall in expected receipts from tax evasion.

And did it prompt HMRC to gather targeted information to address public concern? HMRC still seems to be (at best) unable to tell us how many investigations into tax evasion by wealthy individuals it is carrying out.

Hang on a second.

Perhaps the question whether HMRC should do more to publicise its work is more interesting than it seemed. But I’m not sure I’d agree with the Public Accounts Committee. I’m not sure HMRC should publicise what it is doing.

People might be cross.

Jolyon Maugham QC (pictured) is a barrister practising from Devereux Chambers and has advised the Labour Party on its reform to the non-dom rules. He blogs at Waiting for Godot – Musings on Tax and can be found tweeting here.