Serious concerns about evasion, avoidance and collection within the tax system

The Public Accounts Committee (PAC) has today published online its sixth report of session 2015-16 which delivers a scathing review of HM Revenue & Customs’ (HMRC) recent performance and provides recommendations which should spur HMRC into action.

The report acknowledges that although HMRC has increased the amount of tax collected and reduced its own running costs, the “standard of customer service remains unacceptable” and the PAC “remain extremely concerned” about the lack of criminal prosecutions for tax evasion, particularly offshore tax evasion by wealthy individuals.

The report also recommends that HMRC should identify and report the value of all tax avoidance schemes and should strengthen its capability to investigate offshore tax evasion and make it clear that those who persist in their attempts to “hide assets offshore will face the threat of prosecution”.

Meg Hillier MP, current Chair of the Public Accounts Committee, who succeeded Margaret Hodge in June, has said:

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public. It’s also important that the majority who play by the rules, paying their tax on time and in full, see that those who don’t will face the consequences.”

She goes on to add:

“It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”

It is our thought that this report on HMRC’s recent unsatisfactory performance will galvanise them into action, and that now is the time for wealthy taxpayers and their advisers to ensure offshore structures are robust and that hidden tax charges do not lurk within.  HMRC may be looking at areas such as ten year charges for trusts which have not been returned, undisclosed distributions to UK beneficiaries, as well as unreported offshore funds.

The residence and domicile position of the settlor of trusts will also be under scrutiny so for taxpayers with skeletons in the cupboard it will be important to get their affairs in order at the earliest opportunity.  It may be worth seriously considering whether using the Liechtenstein Disclosure Facility (LDF) offers the best solution.  Taxpayers using the LDF can access reduced penalties and immunity from prosecution, but this favourable facility only remains available until 31 December 2015, therefore now may be the time to seek professional advice.

For further information or if you have any questions in relation to this matter, please feel free to contact any member of the Tax team.

If you aren’t receiving our tax updates directly to your mailbox, please sign up now