HMRC prosecutions of tax evasion enablers plummet

Prosecutions of the enablers of tax evasion have plummeted by at least 75% in the past five years and are lower than previously claimed by HMRC, sparking anger in parliament.

The targeting of enablers – anyone who knowingly helps a ­client evade tax – is a central part of HMRC’s strategy to claw back cash owed to the Treasury. But only a tiny handful at most were prosecuted last year, the Bureau of Investigative Journalism (TBIJ) can reveal.

Figures obtained under UK freedom of information (FOI) laws show that fewer than five such prosecutions were brought in 2023/24, down from 16 in 2018/19.

The latter number is also notably lower than the figure of 29, which was given by the Treasury in response to the same question two years ago.

Lord Prem Sikka, the Labour peer who submitted that written question, said the discrepancy amounted to “contempt of parliament” and that HMRC had made no efforts to clarify the issue. “There is no defence for this,” he said. “HMRC data is not reliable and has never been.”

Figures given for 2019/20 revealed similar inconsistencies, with HMRC now counting fewer than five prosecutions having previously given the number of 14.

In response to TBIJ’s information request, HMRC said the new figures were put together after an internal review and reflected “a more targeted and reliable dataset”.

The department also declined to provide exact numbers for the years in which fewer than five individuals were prosecuted, citing confidentiality concerns. But tax campaigners said this refusal was wrong and a “wild misrepresentation of confidentiality” since prosecutions are a matter of public record.

“This makes a mockery of FOI laws,” said Lord Sikka. “Parliament can’t properly question HMRC because it hides behind a veil of confidentiality [while] ministers just shrug their shoulders and carry on.”

Claire Aston, director of the investigative thinktank TaxWatch, said the “precipitous decline” in prosecutions shows HMRC “aren’t actively tackling those making money from this crime”.

But, she said: “Yet more concerning is that HMRC isn’t keeping accurate records of the numbers prosecuted, and the House of Lords Treasury minister misreported the figures for 2018/19 and 2019/20 by about 50%.”

HMRC apologised for its mistake and said the figures were provided to parliament in good faith.

Tackling enablers became an important pillar of HMRC’s enforcement strategy from 2016. This was propelled by tax-dodging revelations in the Panama Papers, much of which involved complex offshore arrangements designed by white-collar intermediaries.

HMRC has said the term “enablers” covers a range of professionals rather than just tax planners and wealth advisers, but despite this broad scope there has been little meaningful action. In four of the past five years on record, fewer than five prosecutions were recorded per year in this category.

The figure of 16 enablers prosecuted in 2018/19 was the high-water mark of HMRC’s criminal enforcement action, which then declined sharply and has remained low.

The downturn is part of a larger recent decline across HMRC’s enforcement teams, which have struggled with the joint shocks of Brexit and Covid-19.

TBIJ and the Observer previously revealed that prosecutions following HMRC investigations had fallen by more than two thirds in five years, while not a single company had been prosecuted for enabling tax evasion since landmark powers were introduced in 2017.

The current Labour government has put pressure on HMRC to crack down on tax dodging to help support its substantial spending commitments, decisions that are under increased scrutiny following swingeing cuts to disability payments announced earlier this month.

The tax gap – a term used for the difference between the tax revenues HMRC receives and what it calculates it should receive – stood at almost £40bn in 2022/23, the most recent year for which figures are available.

Tax evasion – a deliberate attempt to cheat the revenue of tax owed – is estimated to make up around £5.6bn of that total, but the new figures have raised concerns about HMRC’s commitment to punishing enablers.

“The thriving industry of people enabling tax evasion … will continue until there are visible prosecutions,” said Dan Neidle, a former head of tax at Clifford Chance and founder of the independent thinktank Tax Policy Associates.

“A handful of prosecutions, cloaked in secrecy, won’t change anything. Prosecutions are expensive undertakings, but public confidence in the tax system requires them.”

A spokesperson for HMRC said: “The numbers provided to parliament in 2023 on the prosecution of tax fraud enablers were not accurate and we apologise for that. We issued these figures in good faith and understood them to be correct at the time but have since identified errors, corrected them and lessons have been learned.

“Tackling enablers of tax fraud remains a top priority for us and we currently have more than 150 enablers under criminal investigation. We’re determined they face the consequences as much as those carrying out tax fraud.”