HMRC fails to prosecute any company over tax evasion in six years
Sose Ebodaghe – 12 February 2024
We get it – you might be wondering what this has to do with you, the everyday person who pays their taxes (we hope!). But stay with us because it’s something worth thinking about. HMRC has failed to prosecute any company over tax evasion in the last six years - despite the establishment of the Criminal Finances Act (CFA) in 2017. The Act was introduced in response to the Panama Papers leak of 2016, where a monumental 11.5 million files from Panamanian law firm Mossack Fonesca’s database were leaked, revealing how the extraordinarily wealthy were able to utilise offshore banks to stash money away to avoid paying taxes. The then-prime minister David Cameron (whose father was heavily involved in this scheme) promised change to legislation to make it easier to charge companies who were involved in tax evasion, and thus the Criminal Finances Act 2017 was born. Not only did it introduce the danger of unlimited fines if a company was found guilty, it lowered the threshold to charge these companies under the ‘strict liability’ principle: a business could no longer throw its hands up and feign ignorance about its alleged tax evasion, nor was it necessary for prosecutors to prove that the business intended to evade its taxes in order to be found guilty.
Yet almost seven years down the road, the Act is collecting dust, remaining untouched by the courts who have yet to criminally prosecute any companies for tax evasion. Naturally, HMRC has been subject to a great deal of scrutiny for this, with critics lambasting the authority’s lack of willingness to… use its authority. The number of prosecutions for tax evasion after HMRC investigations has dropped by two-thirds in five years, and a mere 11 wealthy taxpayers were charged in 2022, findings which seem counterproductive to the intention of the CFA. To make matters worse, other attempts at preventing related crimes – like the UK Bribery Act 2010 – have led to meaningful convictions.
Tax evasion and tax avoidance schemes are costing the country almost £5 billion annually, as reported in 2021/22, which marked a £1 billion increase from the year before. In an attempt to lower this figure, HMRC has recently shifted its focus to taxing prominent marketplace and ‘side hustle’ platforms, big names that you’ll recognise and more than likely use, such as Vinted, eBay, Uber, Deliveroo, Etsy, Airbnb, and several others (we told you you’d want to know about this!). Alongside a team of 24 full-time staff members, approximately £37 million has been invested in cracking down on the users of these platforms. The idea is to catch any irregularities that may indicate instances of tax avoidance by allowing HMRC to cross-reference the raw data that these platforms must now thoroughly collect and provide against self-assessments of an individual’s earnings.
You could argue (and many have) that HMRC is perhaps focusing its energy on the wrong initiatives. But tax avoidance remains a problem on multiple scales and metrics.
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