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HMRC has not charged a single firm over tax evasion for previous 6 years

HMRC has not charged a single firm beneath landmark laws handed six years in the past to crack down on company tax evasion.

Critics say the information, launched beneath freedom of data legal guidelines to the Bureau of Investigative Journalism and TaxWatch, means that HMRC is undermining its personal deterrents in opposition to company tax evasion by failing to make use of its legal enforcement powers.

Margaret Hodge MP known as the findings appalling and mentioned the shortage of enforcement had rendered the regulation “a paper tiger”.

It has beforehand been reported that the general variety of concluded prosecutions after HMRC investigations had fallen by greater than two-thirds in 5 years, with solely 11 rich taxpayers prosecuted in 2022.

The Prison Funds Act 2017 launched new powers to cost firms and partnerships working within the UK that did not cease their staff or associates from facilitating tax evasion, no matter the place on the earth the tax was evaded.

One a part of the brand new regulation, often called the Company Prison Offences clause, drastically lowered the bar for prosecuting companies that enabled tax evasion. It launched “strict legal responsibility”, which means that an organization can’t plead ignorance of the wrongdoing to evade a legal cost, and prosecutors would not have to show intent so as to safe a conviction.

It additionally threatened limitless fines within the case of established wrongdoing. Corporations can keep away from punishment if they’ve cheap procedures in place to forestall the facilitation of tax evasion.

The regulation each made legal prosecutions simpler to pursue and strengthened the penalties. In April 2016, in response to the leak of the Panama Papers which revealed how firms and the wealthy exploited tax havens, David Cameron, then prime minister, mentioned: “Beneath present laws it’s tough to prosecute an organization that assists with tax evasion. However we’re going to change that.”

However critics say the refusal to cost a single firm has forged critical doubts on the landmark laws.

“The shortage of any Company Prison Offence prosecutions is kind of critical,” mentioned Dan Neidle, founding father of Tax Coverage Associates and previously head of tax at Clifford Probability. “A deterrent that you simply by no means use is not any deterrent.”

Prison penalties have been the one dependable solution to change behaviour, whereas the over-reliance on civil penalties and fines usually did not curb critical wrongdoing, Neidle mentioned. “If you happen to disarm your self and don’t use the legal instruments that you’ve got obtainable, then you’re lacking the trick.”

A spokesperson for HMRC mentioned: “Company legal offences have been launched to encourage organisations to place preventative measures in place to cease tax evasion. Our efforts have helped drive a company tradition shift in the direction of anti-tax evasion consciousness, which has led to new procedures throughout enterprise sectors.”

HMRC mentioned it has 11 stay investigations and is wanting into an additional 24 potential instances. It has additionally reviewed and rejected a further 94.

Hodge, chair of the all-party parliamentary group on anti-corruption and accountable tax, mentioned: “We’re within the midst of a cost-of-living disaster, and tax evasion is costing our financial system billions every year. So it’s appalling that HMRC has did not prosecute a single enabler of tax evasion.

“We all know that there continues to be a complete trade that helps those that don’t need to pay their justifiable share of tax. We can’t drive cultural change in that trade if its members are beneath the impression that this offence is only a paper tiger.”

HMRC prioritises the recouping of cash misplaced to tax avoidance and evasion via civil settlements, fairly than prosecutions, in accordance with Robert Palmer, the director of Tax Justice UK. He cited the chance and price of prosecuting highly effective opponents with deep pockets.

“HMRC is routinely outgunned by the non-public sector,” he mentioned. “It’s an actual downside, as a result of the minute you go in opposition to somebody who’s wealthy, they will lawyer up and drag issues out. HMRC are outmatched … significantly on the subject of the skilled enablers and facilitators.”

Different laws with comparable “failure to forestall” clauses has resulted in fees and convictions. The UK Bribery Act 2010 made it against the law to fail to forestall bribery and has led to high-profile prosecutions, together with the oil and gasoline firm Petrofac in 2021.

The sensible menace of legal prosecutions means “the Bribery Act continues to be taken very, very severely,” mentioned Neidle, “whereas the Prison Funds Act is dropping off the radar.”

Susan Hawley, director of Highlight on Corruption, mentioned: “Laws solely has a deterrent impact for thus lengthy with none significant enforcement.

“The federal government urgently must resolve whether or not this lack of prosecutions is expounded to failures of political will or resourcing points at HMRC, or deeper issues with the wording of the offence.”