There has been a fall in the number of raids carried out by HMRC in the past year, despite the government’s high profile campaign to crack down on tax evasion, suggesting the tax authorities may find it hard to meet targets for prosecutions, according to analysis by Irwin Mitchell.
Figures obtained by the law firm under the Freedom of Information Act show that HMRC executed 744 search warrants in 2013/14, a 6% decrease on the previous year.
This bucks the trend since 2010, when HMRC geared up on its tax evasion crackdown and increased its prosecution targets fivefold. In 2010/11, HMRC executed 498 warrants, followed by 731 in the subsequent year and 793 in 2012/13.
In 2012/13, HMRC prosecuted 617 people for tax evasion, up from 302 the previous year and in excess of the target for that year (565). But Irwin Mitchell says activity now appears to be slowing down, even though the 2014/15 target for tax evasion prosecution has been set at 1,165.
Phil Berwick Irwin Mitchell partner, said: ‘With increased prosecution targets, HMRC appear to be struggling with the number of raids conducted. At a time when you would expect the number of raids to continue increasing, they have reduced. The labour-intensive nature of raids will have an impact on the level of activity that HMRC can undertake. Also, HMRC is being pulled in many different directions, which doesn’t help.’
The smaller number of warrants executed may partly be down to more taxpayers making use of disclosure options to reveal undeclared earnings, although Berwick pointed out that only the Lichtenstein disclosure facility guarantees immunity from prosecution.
He also said there were sound reasons for the trend for HMRC to conduct significantly more raids to continue, saying: ‘The government has announced proposals to make it easier for HMRC to secure criminal convictions, but HMRC still needs to obtain sufficient evidence to secure a conviction. Executing a search warrant is often the simplest way of doing so.’
Berwick said: ‘HMRC is sending the message that it is going after tax evaders, but there is an increasing tendency to go for softer targets, where smaller sums are involved, but a conviction may be easier to obtain.’
Individuals who have committed fraud or evasion are now more likely to be identified as HMRC is getting better at using the vast bank of data and information that it holds, and being able to join the dots between that data, added Berwick.
‘A raid is a part of the process when HMRC pursues a criminal investigation. Despite the poor HMRC performance last year, taxpayers suspected of fraud will not relish the early morning knock on the door that indicates the start of a raid, followed, usually, by the arrest of that taxpayer and their removal to the local police station,’ Berwick said.
Recent figures released by HMRC showed that between April 2010 and March 2014, the department prosecuted 2,650 individuals for tax crimes, including high profile barristers, accountants and lawyers.
