The number of criminal investigations completed by HMRC has increased 11% to 386 from 347, says multinational law firm Pinsent Masons, in the year to September 2024.
The total length of prison sentences handed down for tax evasion and tax fraud have also increased – to 525 years in the past year, up from 503 years.
Steven Porter, Partner and Head of Tax disputes and Investigations at Pinsent Masons says that targeted criminal prosecutions of tax evaders is partly used by HMRC to act as a deterrent and to persuade tax evaders to use HMRC’s Contractual Disclosure Facility. This offers individuals immunity from criminal prosecution in return for a full disclosure of the tax evasion they have been involved with.
The maximum penalty for income tax evasion is a fourteen-year prison sentence and/or an unlimited fine. This had doubled from seven years in the Finance Act 2024.
The expectation is that is that HMRC will step up its investigations into tax evasion even further as it comes under pressure to increase the tax take from tax investigations. The Government announced plans in the last budget to collect an extra £6.5billion from tax investigations over the next five years.
When the Crown Prosecution Service present a tax fraud case in court they can push for a longer sentence by highlighting certain aspects of a tax evader’s behaviour. For example, evidence that suggests a tax evader was working to a sophisticated plan or that they pressed other individuals (such as employees) into assisting them could result in a longer custodial sentence.
Longer sentences could also be handed down if the court finds that the accused had:
- Deliberately concealed information when under investigation by HMRC
- Evaded tax for a significant period of time
- Played a leading role in a plan to evade tax to make a personal gain
Steven Porter says: “HMRC are sending a clear message to tax evaders that they won’t be let off lightly – longer sentences send a strong message that HMRC will use the full force of the law.”
Several lengthy sentences for tax evasion have been handed out in recent years, including:
- Two members of a clothing manufacturing company sentenced to a combined total of 31 years, alongside 26 other members sentenced to a total of 147 years and seven months for carrying out a “carousel fraud” scheme, falsely claiming £97m of VAT repayments on false exports.
- A partner of an accountancy firm in Northern Ireland was handed a four year sentence for creating, alongside 26 accomplices, a false audit trail for construction clients to avoid tax totalling over £5m
- Two property developers sentenced to a total of 8 years for the use of offshore companies to hide money from the sale of land, evading £3.2m in Corporation Tax
- Former Formula One owner Bernie Ecclestone was sentenced to a 17 month jail term, suspended for two years, after failing to declare offshore assets over £400m
The total number of years in prison sentences has reached the highest level since 2020
