The number of HM Revenue and Customs (HMRC) investigations that result in prosecutions has fallen by more than two-thirds in five years, with just 11 wealthy taxpayers prosecuted last year.
The number of concluded prosecution cases fell from 749 in 2018-19 to 240 in 2022-23, a drop of more than 67%, according to the figures obtained by the Bureau of Investigative Journalism and TaxWatch.
The statistics reveal that over the same five-year period the number of wealthy individuals – defined by HMRC as those with at least £2m in assets or with income of £200,000 a year or more – who were prosecuted fell from 20 to 11.
Margaret Hodge, the former chair of the House of Commons public accounts committee and a fierce critic of tax avoidance, said: “The scale of decline here is unacceptable. Where is the appetite from ministers for going after tax dodgers? Who will throw the book at these crooks? At a time when families are having to choose between heating and food, there has to be a real impetus to take the fight to those not paying their fair share.”
Some tax teams pursuing individuals and companies have been diverted in recent years from their work by Covid-19 fraud and Brexit.
HMRC has also faced a number of staffing challenges. Since 2020, more than 2,000 members of its workforce were redeployed to deal with the effects of Brexit and manage the Covid-19 response.
The service’s compliance team has a total workforce of about 27,800. In its latest annual report, HMRC says that it is recruiting and training new staff, but in the short term these employees will be less experienced. The low number of prosecutions is in spite of the fact that HMRC’s staffing budget for investigating wealthy tax avoiders has increased, from £13.6m in 2016-17 to £27.1m in 2022-23.
Dan Neidle, founder of Tax Policy Associates and former head of tax at Clifford Chance, one of the world’s biggest law firms, said HMRC is using its resources to pursue lower-risk civil penalties and settlements rather than risky and expensive criminal proceedings. He warned that it undermined the rule of law if offences were not pursued in the courts.
“With civil law and penalties, people make an equation: what’s the risk?” Neidle said. “With criminal prosecution, you don’t make any kind of equation – you just don’t go near it.”
Phil White, a consultant and member of Patriotic Millionaires UK, a group of millionaires campaigning for higher taxes on the wealthy, said: “Given the billions of pounds estimated to be lost via tax havens in the next decade – many of which are in the UK domain – it is hard to believe that HMRC has only prosecuted 11 wealthy individuals in the last year.
“At a time when families are counting every penny spent for mealtimes and totting up the cost of keeping their lights on, HMRC should be doubling down on those who can most afford to pay their taxes – especially so for those doing all they can to avoid paying them.”
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The number of criminal investigations opened by the service has increased since hitting a low during the pandemic; however, the number of new investigations opened last year was still less than half those it managed at its peak in 2016-17.
An HMRC spokesperson said: “We treat all customers equally and we are clear that everyone must pay their fair share of tax, regardless of wealth and status. Our work tackling avoidance, evasion and noncompliance by the wealthy secured £4bn last year – a 60% increase on the previous year.
“Prosecution numbers have been impacted by court delays due to the pandemic, but we still have more than 300 people under criminal investigation as part of our work to tackle the wealthiest and most sophisticated offenders.”
