Fiona Fernie, partner in the tax investigations team at BDO, looks at how the UK authorities are dealing with tax evaders and the kind of issues that professionals in the wealth management business must apprehend.

The following article, by Fiona Fernie, partner in the tax investigations team at [tag|BDO|]BDO[/tag], concerns how the UK authorities are dealing with tax evaders and the kind of issues that professionals in the wealth management business must apprehend. As is always the case, the views of the author are welcomed by this publication, but it does not necessarily agree with all of the views expressed.

Tax evasion has received a great deal of attention, nationally and internationally, in recent years, particularly since the economic crisis focused the minds of government ministers on the need to raise as much revenue as possible.

Resources and results

In the UK, increasing amounts have been allocated to HM Revenue & Customs specifically to combat tax evasion and improve compliance. In 2010, a huge £917 million ($1.534 billion) was allocated from efficiency savings with an aim of generating additional compliance revenues of £7 billion a year by 2015. In 2012, a further £77 million was allocated to specific additional projects aimed at reducing evasion and avoidance, and HMRC recently announced that it had already brought in an extra £1.4 billion of tax revenue by investing £45 million in new and advanced information technology.

So, how does HMRC catch evaders?

For some time now, HMRC has adopted a classic “carrot and stick” approach – a carrot of reduced penalties and/or tax liabilities for those who come clean and make a voluntary disclosure, and a stick of higher penalties, prosecution and recovery of assets for those who do not.