29/07/21

UK: HMRC's elite Offshore unit securing prison time for tax evaders trebled last year.

As published on cityam.com, Thursday 29 July, 2021.

HMRC’s elite Offshore, Corporate and Wealthy (OCW) Unit secured convictions totalling 67 years of prison time for tax evaders last year, nearly trebling the total of just 23 years secured a year earlier.

The increase in prison sentences is a sign that HMRC’s strategy of using targeted criminal investigations, rather than just civil penalties, as a powerful deterrent to address deliberate conduct including professional enabling and tax evasion by high net worth and ultra-high net worth individuals is bearing fruit, according to law firm Pinsent Masons.

The OCW Unit was established in the wake of the ‘Panama Papers’ scandal in 2016 to investigate serious non-compliance by businesses and the wealthiest taxpayers.

The sentencing secured in respect of the unit’s casework will reflect the fact that where you have wealthy ‘white collar’ evaders, significant sums of money, or breaches of positions of trust are likely to be in play.

“HMRC is proving that wealthy tax evaders who engage in deliberate dishonesty at the expense of the tax man don’t just get fines – they go to prison,” commented Andrew Sackey, partner at Pinsent Masons.

“The perception that wealthy people who evade tax only get financial penalties is increasingly untrue. The Offshore, Corporate and Wealthy Unit is now regularly completing painstaking criminal investigations of the most complex and serious forms of tax evasion, resulting in convictions and significant prison time,” Sackey told City A.M. today.

He stressed that the increase in prison time handed out as a result of OCW investigations forms part of a concerted push by HMRC to seek to persuade the Courts to punish serious tax evasion with deterrent custodial sentences.

Research by the law firm earlier this year found that the average prison sentence length for tax evasion rose again last year to an average of 2 years 11 months, up from 2 years and 1 month in 2015/16.

Sackey explained that the OCW Unit is part of HMRC’s specialist Fraud Investigation Service (FIS), and is responsible for the most complex and high-risk matters investigated by HMRC, including combating international tax evasion and professionals who deliberately enable others to evade their liabilities.

The current threshold for wealthy individuals to be investigated by HMRC’s specialist OCW Unit is lower than many might expect, anyone with an income of over £200,000 per year falls within their terms of reference.

“Prison sentences are the most powerful weapon in HMRC’s arsenal, they impact not just on the evader but their families who have to live with the consequences of convictions, and often tax assessments and confiscation proceedings. Not only do they punish the most serious tax evaders, they act as an effective deterrent to many others considering that course,” Sackey explained.

It is not only ultra-high net worth individuals who are being investigated by the OCW Unit. The £200,000 income threshold means that a large number of people are within its purview.

“High-earning white collar professionals who engage in tax evasion should be concerned about the potential of the OCW Unit investigating them and, where they find evidence of dishonesty, pursuing a criminal investigation and custodial sentence,” Sackey concluded.