Both main parties want a crackdown on tax – so why has HMRC not fined a single adviser in five years?

We were told by a boastful Treasury that Britain is one of the first countries to take a hard stance against tax evasion, writes Chris Blackhurst. But it’s been years since new powers were introduced, and with zero results it’s clear that shady advisers are winning

Tortola in the British Virgin Islands. With income tax in the territory set at zero, it’s attractive in all kinds of ways (Reuters)

Labour will raise an extra £5bn a year from cracking down on tax evasion and avoidance. Not to be outdone, the Tories maintain they can obtain £6bn a year from closing tax loopholes and driving against tax dodging.

Welcome to the fantasy world of British politics. It’s one in which every party has at various times promised to do more to bolster revenue collection.

Pretty much each annual Budget sees the chancellor making a pledge along those lines. Similarly, at the party conferences: mention a clampdown on schemes set up to help the rich escape their dues, it’s bound to get applause; the faithful will love it.

On every occasion it’s cited, the City breaks into a collective wry smile. Fat chance, they think. You’ve been saying it for years.

Notice how the politicians are never specific as to how exactly the money will be found. They just assume it’s there, an easy target for the taking. As to the numbers, they literally are back-of-the envelope sums, plucked out of thin air. Make that £5bn; no, try £6bn.

It’s not as if this isn’t much-needed cash. Labour would use the funds to cut NHS waiting lists and introduce free primary school breakfast clubs. The Tories would put £1bn towards the party’s proposed new national service scheme.

Please can someone challenge them, or at least tell them to stop indulging in make believe and hoodwinking us, the electorate. The City, or more particularly those professional firms and advisers who make their living assisting folk in minimising their tax bills, are running rings around HM Revenue and Customs.

Most of us, of course, don’t have a choice. We don’t have the ability and means to avail ourselves of clever ruses. We just pay up.

Not the City. According to the last calculation, the “tax gap” – the difference between tax paid and owed – is £36bn a year. That was for 2021-22, the most recent figure available. It is bound to be higher now – but just how high nobody knows (even that total was subject to a degree of speculation).

There are other statistics. In 2021, HMRC disclosed that it believed UK taxpayers held £850bn in foreign accounts in 2019, of which £570bn was in tax havens.

So, what can be safely said is that there is an awful lot of lucre stashed beyond the reach of the UK tax authority, and if even a fraction of it was seized the state of the public finances could be transformed.

We also know there is an entire industry dedicated towards keeping it where it is. Which is why it is so disheartening to read that not one single “enabler” – those who facilitate tax avoidance and evasion – has been fined in the five years since new powers were introduced to pursue them.

This is not something that tough, action-man Rishi Sunak chooses to share. But disclosures under freedom of information laws to the Bureau of Investigative Journalism reveal the depressing picture.

Launched with typical fanfare in 2017 by Tory ministers, the new rules enabled HMRC to pursue enablers to “create a level playing field” by imposing financial penalties running into millions of pounds.

They were accompanied by new powers to make it easier to go after the perpetrators. The penalty was a £3,000 fine or 100 per cent of the amount of tax that was evaded, whichever was bigger.

We were told by a boastful Treasury that the UK was one of the first countries in the world to take such a hard stance. “While tax evasion has always been illegal, this law will mean HMRC can, for the first time, charge civil penalties on the facilitators of the tax evasion who provide planning, advice or other professional services or physically move funds offshore.”

We’re still waiting. The brave talk, the new weapons... they simply have not been followed through with action.

Either they are not trying, or they are trying but getting nowhere. It’s not clear which. In any event, the enablers are winning.

There have been some successes, notably against the former F1 supremo, Bernie Ecclestone, and a settlement with the owner of Ladbrokes and Coral over a historic matter. But they are few and nowhere near what we were led to expect.

Ministers, who have been sitting on this lack of results, should have been cracking the whip and demanding more effort or making the tools available for the tax inspectors to succeed.

It does not help matters that the UK has one of the most complicated tax regimes in the world, which inevitably allows loopholes to occur. Nor, that our government oversees some of the best-known, most secretive, offshore tax havens, such as the Isle of Man, Channel Islands, Gibraltar, the Cayman Islands and the British Virgin Islands.

However, there is no accounting for incompetence. It’s come to light that HMRC squandered the chance to hold a notorious promoter of tax avoidance schemes to account after making a “rudimentary” error at tribunal.

A tax tribunal judgement discloses how the UK tax authority was attempting to bring a £14m penalty against Paul Baxendale-Walker, a former lawyer and tax adviser. In a separate court filing, HMRC estimates this enabler’s schemes to have cost the exchequer some £1bn in lost taxes.

But HMRC missed vital deadlines, which invalidated the penalty.

That is for the past. Come 5 July, we can rest assured the new administration is going to make the lives of Baxendale-Walker and his colleagues hell. We wish!