Two brothers from Yorkshire have been sentenced for tax evasion to the tune of more than £3.2 million, having used offshore companies in overseas territories to hide money from the sale of land to evade paying the tax they owed.

Stephen and Michael Hirst pleaded guilty to cheating the public revenue and were both jailed for two years, with the sentence suspended for two years and were both disqualified from acting as Company Directors for eight years. They were also ordered to pay substantial fines.

According to the prosecution, the evasion of tax had been planned over many years, starting in August 1999, when a company owned by the brothers called ‘Heritage Holdings Limited’ bought land on Park Drive in Wakefield for just over £700,000.

The Hirsts split the Park Drive land into four parts and sold some of the land, for a lot less than it was worth, to a second company ‘TIMS Investments Ltd’, which was registered in Gibraltar but run by the brothers from the UK.  They also set up another company of the same name in the British Virgin Islands.

Then in 2007, they sold the land for more than £10 million after planning permission was granted. This should have generated a tax liability of more than £3.2 million but the Hirsts did not declare it to HM Revenue & Customs (HMRC).

Following a civil investigation by HMRC in 2013, the brothers were given the opportunity to declare any liability through a formal civil process known as a Contractual Disclosure Facility (CDF) or a ‘COP9’.

The COP9 process requires the taxpayer to make a “full, open and honest” disclosure or face a criminal investigation.

However, rather than taking advantage of this offer, they failed to respond and when they did so only revealed partial information, lying about the network of companies they had set up to perpetrate the fraud. This led to HMRC beginning a criminal investigation in November 2016.

Simon Denton, Tax Partner at Milsted Langdon, said: “This case demonstrates the seriousness of a COP9 investigation.  It is typically regarded as a “last chance saloon” for those suspected of underpaying tax who might otherwise be facing prosecution.

“Those who find themselves subject to a COP9 enquiry should seek urgent professional advice from advisers with experience of this highly technical field.  They need to understand that failing to respond with full disclosure can result in not only fines but a criminal record and even potentially a custodial sentence.” 

Sources: Client’s own, Liverpool Echo