Regulators

HMRC entering into fewer plea bargain agreements with taxpayers

HMRC is entering into fewer agreements that give taxpayers immunity from prosecution for tax avoidance in exchange for paying back tax and penalties, according to new data from international law firm Pinsent Masons.

The number of agreements under the Contractual Disclosure Facility entered into by HMRC fell 10% last year to 438, down from 486 in 2017/18. This number has fallen 20% since 2016/17.

Pinsent Masons said the fall in agreements has “raised concerns” that HMRC is becoming “increasingly reluctant” to let tax evaders come in from the cold and settle their affairs.

It added that if HMRC enters into an agreement under the Contractual Disclosure Facility, then it agrees to not criminally investigate a taxpayer with a view to prosecuting them.

In return, a taxpayer admits to evading tax and provides details as to how much is owed. Taxpayers can apply to HMRC to be considered for this treatment.

Pinsent Masons said the “growing” amount of data that HMRC has on taxpayers’ offshore savings and investments has reduced its need to enter into plea bargain agreements. The data that HMRC now has on overseas savings and investments enables it to more easily build a case against a taxpayer and prosecute them.

HMRC has received information on 5.7 million offshore bank accounts held by UK taxpayers since a new global data sharing initiative, the Common Reporting Standard, which was affected in 2016/17.

Steven Porter, partner at Pinsent Masons, said: “HMRC has a growing stack of individuals that it is confident it can prosecute. That means it less, enthusiastic, or even willing to offer plea bargain agreements.

“Its new investigatory powers and the reams of data that HMRC gets from private banks, from lettings agents, from the Land Registry, from accountants means it is not short of leads.”

He added: “Plea bargain agreements have become increasingly popular with taxpayers in recent years. In the past, only those with very large tax exposures used these agreements but now those who owe much smaller sums are applying for them.

“Many would argue that HMRC should still continue to market these immunity deals as they are a powerful incentive to those who otherwise have little reason to come forward. It also generates very substantial amounts of revenue without all the cost of investigations and prosecutions – over £200,000 per case.”

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