High net worth individuals might have to be able to prove that they are paying the correct amount of tax as the Government ramps up its investigations into tax evasion.
HM Revenue & Customs (HMRC) is seeking to show its commitment to combatting non-payment of tax by launching probes into individuals and firms it suspects of complex tax evasion.
According to the Financial Times, the tax authority has launched 430 probes into individuals and firms it suspects of sophisticated tax evasion in the 2019-2020 tax year.
This is an increase of around 25 per cent on the previous year and a rise of 65 per cent from the 260 investigations it began in 2017-2018.
HMRC promised to increase the number of criminal investigations in the wake of 2016’s Panama Papers, which exposed thousands of wealthy individuals who had been trying to hide their money offshore.
Following the leak, the Government launched a dedicated taskforce to analyse the data it provided and open civil, as well as criminal probes.
This could be lucrative for HMRC, as last year investigations related to the Panama Papers are estimated to have netted more than £190 million in additional tax revenue.
In a statement, HMRC said that by tackling the more serious forms of tax crime, the body is “creating a level playing field for businesses and citizens”. However, for anyone who comes under HMRC’s scrutiny, it is likely to be a tough ordeal.
Roger Isaacs, Forensic Partner at Milsted Langdon, said: “An HMRC tax investigation can be extremely costly for a tax payer even if it concludes that no additional tax is due. For that reason, it is always worth considering obtaining insurance that covers the cost of professional fees that are incurred dealing with tax enquiries.
In some cases, investigations can last several years and HMRC has wide ranging powers that can result in not only substantial penalties and interest charges but, in the most serious instances of evasion, criminal sanctions including custodial sentences. It is when there are accusations of illegal activity, the forensic accountants often become involved to present evidence for the purposes of court proceedings.”