HMRC investigations into corporate tax evasion drop to lowest level in five years

• Regulator reveals there are just 7 live Corporate Criminal Offence (CCO) investigations
• In 2021, there were 14 live CCO investigations
• HMRC has not issued a single prosecution since CCOs were introduced in 2017
• Law firm RPC says Brexit, Covid and financial constraints have all impacted HMRC

HMRC has not prosecuted any company since the Corporate Criminal Offence (CCO) was introduced nearly five years ago - while 2022 has seen the lowest number of live investigations yet undertaken by the regulator, an analysis by international law firm RPC reveals.

CCOs were introduced in the Criminal Finances Act 2017. Companies and partnerships which fail to prevent those associated with that business from facilitating tax evasion in the UK or abroad and where they have not done enough to prevent this from occurring face becoming criminally liable themselves.

Businesses are encouraged to put reasonable procedures in place to prevent tax evasion – and those that do not could face "potentially unlimited fines", according to HMRC.

Despite CCOs coming into force on 30 September 2017, HMRC has not instigated a single prosecution.

Recently published HMRC figures show that as of 13 May 2022, it has just seven live CCO investigations – half as many as in 2021 - and a further 21 opportunities under review.

The investigations span 11 different sectors including software providers, labour provision, accountancy and legal services and transport.

By comparison, in 2021 there were 14 live CCO investigations and 14 opportunities under review.

Adam Craggs, head of RPC's Tax, Regulatory and Financial Disputes team, said: "Given that the aim of the legislation is to make it easier to prosecute companies if their associated persons, such as employees, or third parties acting on behalf of the business, facilitate tax evasion, it is surprising that in five years there hasn't been a single prosecution and the investigation numbers remain so low.

"This is not about simply increasing the number of corporate prosecutions, but encouraging organisations to do more to prevent tax evasion happening in the first place. 

"Without any prosecutions or convictions under the CCO, the deterrent effect of a potential prosecution will be short lived. Businesses are unlikely to invest year-on-year in compliance programmes aimed at preventing the facilitation of tax evasion if there is no concern that they will be prosecuted for failing to do so. 

"With potentially unlimited fines for organisations found guilty of the offences, organisations must take their responsibilities seriously and put in place reasonable procedures to stop the facilitation of tax evasion. 

"In addition, a successful prosecution can result in a business having restricted access to some regulated markets and hinder its ability to bid for government contracts both in the UK and overseas".

A statement on HMRC's website states: "We’ve always been clear that these numbers will go up and down as part of the normal criminal investigation process. Not every opportunity will lead to an investigation and not every investigation will lead to a charge.

"In some cases, following investigation we have been satisfied with explanations provided and have not established deliberate facilitation. But those investigations have found other tax and regulatory offences that are being pursued."

Information released (as at 13 May 2022)

2019:
9 live CCO investigations
21 opportunities under review

2020:
13 live CCO investigations 
18 opportunities under review 

2021:
14 live CCO investigations
14 opportunities under review

2022:
7 live CCO investigations
21 opportunities under review

These investigations and opportunities span 11 different business sectors and sit across all HMRC customer groups. Sectors include software providers, labour provision, accountancy and legal services and transport.

There have been no prosecutions since CCOs were introduced in 2017.

2022 has seen the lowest number of live investigations since CCOs were introduced.

Background

At the March 2015 Budget the government announced that it would make it a crime for corporations to fail to put in place reasonable procedures to prevent associated persons from criminally facilitating tax evasion. The intention being that relevant bodies should be criminally liable where they fail to prevent those who act for, or on their behalf from, criminally facilitating tax evasion.

The CCOs were introduced by Part 3 of the Criminal Finances Act 2017 and came into effect on 30 September 2017.