HMRC heightens focus on professional enablers of tax fraud, says top official UK agency’s
Simon York says ‘much more sophisticated’ evasion calls for more international collaboration
Simon York: ‘Tax fraud has been really dramatically changing over the past decade or so
The UK tax authority is stepping up efforts to catch professional enablers of tax fraud, a top HM Revenue & Customs official has warned, following “dramatic changes” to the increasingly cross-border crime. Simon York, HMRC’s outgoing head of serious fraud, told the Financial Times that tax evasion was becoming “much more complex, more sophisticated, more international and more digitally enabled”.
He added that the agency was intent on pursuing the financial and professional services firms that facilitate tax evasion as well as evaders themselves, noting that this required more collaboration with international counterparts.
York’s comments follow calls for the UK to crack down on tax evasion.
Despite the introduction in recent years of a slew of transparency and anti-money laundering regulations, the government estimates that roughly £10bn is lost annually to tax fraud. That figure represents almost one-third of the “tax gap”, defined as the difference between taxes owed and paid.
On Wednesday, a parliamentary reportfound a “failure to better resource compliance” was leading HMRC to miss out on billions of pounds of tax revenue.
In response, the authority said it had “cut the tax gap by more than 30 per cent” since 2005. York, who will leave HMRC in April after almost 30 years, admitted the agency had more to do but said its fraud investigators had since 2015 recovered or prevented the loss of close to £40bn in tax revenues, leading to about 4,000 criminal convictions. “Tax fraud has been really dramatically changing over the past decade or so,” said York. “[But] I wanted no tax fraudster to be beyond our reach . . . I think we’ve gone an awful long way to doing that.”
Tax authorities worldwide have come under increasing pressure to curb offshore evasion following a series of data leaks including the 2016 Panama Papers and the 2021 Pandora Papers, which shone a light on where wealth was hidden by elites, often in complex ways.
York, who will leave HMRC in April after almost 30 years, admitted the agency had more to do but said its fraud investigators had since 2015 recovered or prevented the loss of close to £40bn in tax revenues, leading to about 4,000 criminal convictions.
“Tax fraud has been really dramatically changing over the past decade or so,” said York. “[But] I wanted no tax fraudster to be beyond our reach . . . I think we’ve gone an awful long way to doing that.” Tax authorities worldwide have come under increasing pressure to curb offshore evasion following a series of data leaks including the 2016 Panama Papers and the 2021 Pandora Papers, which shone a light on where wealth was hidden by elites, often in complex ways
In 2016, York created the Fraud Investigation Service (FIS) to bring together HMRC’s civil and criminal experts, which he said provided a “potent blend” for difficult cases. He added that the 5,000-strong unit, the UK’s largest anti-fraud team, had shifted focus from volume to the biggest, most complex cases.
While the number of criminal prosecutions brought by HMRC fell from about 850 in 2016-17 to 163 in 2020-21, at the height of the pandemic, the average amount it recouped rose from £2.3mn to £7.1mn in the same period. As well as prioritising large cases, York said a “big focus” had been co-operation with overseas agencies to target people facilitating fraud, given the growing need “for evaders to use professionals of one sort or another . . . to help them”.
He pointed to the “J5”, an alliance formed in 2018 by his team and counterparts in the US, Australia, Canada and the Netherlands to pursue cyber criminals and enablers of international tax crime. One of the taskforce’s first big probes was into suspected tax evasion and money laundering at Euro Pacific Bank, based in Puerto Rico. Last summer, the lender was suspended by regulators in the US territory for breaching its capital requirements.
EPB, which has since entered liquidation, had about 8,000 customers, at least 600 of whom were UK residents. “I think the game has really changed in terms of offshore evasion,” said York. “There probably was a time when the worst that could happen was a big civil penalty . . . that’s not the case anymore.”
Jon Preshaw, an expert in tax disputes and former HMRC investigator, said the authority had been working “much more effectively” on big cases with overseas counterparts, helped by provisions including the Common Reporting Standard that have made evasion harder. Under the CRS, more than 100 countries have since 2017 automatically exchanged the details of individuals’ bank accounts and trusts. Failure to prevent the facilitation of tax evasion has also been a corporate criminal offence since 2017.
Recommended Your QuestionsLucy Warwick-Ching Will I have to sell my home to pay an IHT bill? Nevertheless, a freedom of information request in May 2022 found UK residents had £850bn in accounts overseas — of which £570bn was in tax havens. The government has said it will publish estimates of the scale of tax evasion by UK residents holding money offshore for the first time this year.
Preshaw also said that, because of the time it takes to train new recruits, a recent expansion by FIS had resulted in a less-experienced team, “impact[ing] the speed and quality of decision making”. In response, HMRC said its “track record speaks for itself” and that it was “expert at protecting and recovering [taxpayer] money”.
Meanwhile, the agency has in recent months been criticised for its handling of three of the government’s Covid-19 support schemes. It puts the amount of taxpayer money lost to fraudulent and erroneous claims at £4.5bn. York said the amount lost to organised crime groups was “minuscule”, at an estimated 0.3 per cent for the “furlough” job retention scheme, adding that about 60 arrests had been made so far.
