HMRC investigations led to prosecutions against just 11 high net worth people accused of evading tax last year although 300 people are currently being investigated
The number of convictions of high earners with earnings over £200,000 has nearly halved since before the pandemic, revealed an investigation by the Bureau of Investigative Journalism and TaxWatch, following a number of Freedom of Information requests into the number of HMRC convictions in 2022-23.
HMRC classes a person as wealthy if they earn more than £200,000 a year or have assets worth over £2m.
The number of total HMRC prosecutions for tax evasion has slumped in the last five years from nearly 900 in 2017-18 down to just over 200 in the last tax year.
Fewer than 100 of the richest individuals have been taken to court for tax evasion over this five-year period.
Dan Neidle, founder of Tax Policy Associates and former head of tax at Clifford Chance, said: ‘[This] focus on financial recovery means they’re not using the criminal law as they should. The problem is that it undermines the rule of law if people are able to do tax evasion, get caught, and then not face criminal penalties.
‘Criminal law is a way more powerful deterrent. With civil law and penalties, people make an equation: What’s the risk? With criminal prosecution, you don’t make any kind of equation – you just don’t go near it.’
The number of criminal investigations opened by HMRC has increased since hitting a low during the pandemic; however, the number of new investigations opened last year was still less than half those it managed at its peak in 2016-17.
‘Given the billions of pounds estimated to be lost via tax havens in the next decade – many of which are in the UK domain – it is hard to believe that HMRC has only prosecuted 11 wealthy individuals in the last year,’ said Phil White, a consultant and member of Patriotic Millionaires UK, a network of millionaires campaigning for higher taxes on the wealthy.
‘At a time when families are counting every penny spent, HMRC should be doubling down on those who can most afford to pay their taxes.’
The low number of prosecutions is in spite of the fact that HMRC’s staffing budget for investigating wealthy tax evaders has increased, from £13.6m in 2016-17 to £27.1m in 2022-23 – about a 54% rise in real terms.
However, during the pandemic HMRC reduced activity on compliance and has only ramped up tougher investigations activity in the last year when more resources were released after disbanding covid teams.
An HMRC spokesperson said: ‘We treat all customers equally and we are clear that everyone must pay their fair share of tax, regardless of wealth and status.
‘Our work tackling avoidance, evasion and non-compliance by the wealthy secured £4bn last year – a 60% increase on the previous year. Prosecution numbers have been impacted by court delays due to the pandemic, but we still have more than 300 people under criminal investigation as part of our work to tackle the wealthiest and most sophisticated offenders.’
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