HMRC must do more to counter the belief that "people are getting away with tax evasion". This was one of many recommendations in a recent report by the House of Commons Public Accounts Committee (the "Report").
The Report focuses on the need for HMRC to take steps to counter the view that "the rich can get away with tax fraud". It is clear that the public perception of the debate surrounding tax evasion – and the wider issue of avoidance – is now impacting how HMRC are to treat such matters in future.
Specifically, it was highlighted that the "tax gap" (the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected) is currently £34billion. Tax fraud alone accounts for at least £16 billion of uncollected tax each year.
It is for this reason that HMRC has received funding to increase the number of investigations into wealthy individuals and corporates by over 185% over the next four years. There is even a government recommendation to "publicise this work".
The message is clear: not only is HMRC being asked to increase its efforts when it comes to investigating and prosecuting those that commit tax fraud, but it is also expected to shine a light on such matters. The aphorism derived from the principle of natural justice that "justice must not only be done, but must be seen to be done" springs to mind.
So what does this mean for those facing HMRC investigations?
Any time a government body is accused of failing to meet a target, it is safe to say that in the following year they will take steps to address such an issue – even at the risk of neglecting other key areas.
You can therefore expect a greater number of individuals and corporations to be investigated by HMRC for anything which might mean that they can record a 'successful' outcome.
Importantly, it does not seem to be the case that HMRC will be prioritising areas that pose the biggest financial risk. Instead, it is likely to use criminal prosecution to tackle different areas of fraud and to deter others.
HMRC has wide-ranging and draconian powers when it comes to those accused of tax fraud. At the most serious end is "cheating the Revenue" – an offence that carries a maximum penalty of life imprisonment and/or an unlimited fine.
In any event, HMRC takes a dim view of anyone it considers to be evading or attempting to evade tax. This is particularly the case where the accused is a professional (e.g. an accountant) where HMRC regularly undertakes criminal prosecutions, regardless of the sums involved.
The Report may herald a new era of widespread and more thorough investigations into any activities HMRC deems to be fraudulent.
Even those that are wholly innocent can easily get caught up in investigative fervour and will need to take appropriate steps to combat the substantive resources and energy that HMRC will be putting into such matters going forward.
Greater publicity of those investigated and prosecuted in this area is an expected by-product.
Watch this space…