HMRC, Strict Liability and ‘Unexplained Wealth Orders’

A More robust Revenue: HMRC, Strict Liability and ‘Unexplained Wealth Orders’

In recent years, it’s fair to say that there has been a not so subtle shift in the activities and public perception of HMRC.

It seems that not that long ago, it was regarded as something of a dull but irritating administrative arm of government with its powers limited to collecting the nation’s taxes – and issuing fines to those who didn’t pay their dues on time.

Now, though, the Revenue is no longer so passive.

Cast your mind back to the bold pronouncements made following the high-profile raids by hi-vis jacketed Revenue officers at Premier League football clubs last April.

“This criminal investigation”, said a spokesman at the time, “sends a clear message that, whoever you are, if you commit tax fraud you can expect to face the consequences”

That, of course, came just weeks after another very visible investigation into alleged tax evasion relating to suspect accounts at the Swiss bank Credit Suisse was launched in the Netherlands involving HMRC and a number of its European counterparts

Months after that came boasts about having lost only three out of 26 tax avoidance cases which had ended up before the courts.

Suddenly, it appeared that the Revenue was no longer operating in relative obscurity but very much keen to attract attention with more muscular action and remarks.

People expecting the next development to be similarly public have perhaps, though, been taken by surprise. As well as grabbing headlines, HMRC has been acquiring new authority including only last week – and by stealth more than fanfare – some very meaningful powers courtesy of what are known as ‘unexplained wealth orders’ or UWOs, for short.

They are the third element of a hat-trick of powers contained in last year’s Criminal Finances Act (the others being two new corporate criminal offences of failing to prevent the facilitation of tax evasion) and allow HMRC and other enforcement or investigation authorities, including the National Crime Agency and Serious Fraud Office, to potentially strip individuals of assets worth more than £50,000 if they can’t account for how they were acquired.

The measures originate from the anti-corruption drive initiated by the former Prime Minister, David Cameron and his anti-corruption ‘tsar’, Sir Eric Pickles.

Whilst UWOs are intended to be used as part of the UK Government’s thrust against corruption and criminality, their potential scope is extraordinary. Consider, if you will, what they mean for a politicians or other public officials – individuals designated as “Politically Exposed Persons (PEP)” by the legislation from countries outside the European Economic Area (EEA).

In such cases, a UWO can be obtained without requiring suspicion of any “serious criminality”. If someone attempts to justify an asset, their evidence can in itself form part of an investigation. Failing to come completely clean on the source of wealth can land individuals a jail term of up to two years and a fine as well.

For HMRC, UWOs are potentially significant in that they require only reasonable grounds for suspecting involvement in serious crime, including tax evasion, rather than proof.

From this April, the regulations which permit HMRC the orders will also increase its search and seizure capabilities and won’t just enable it to confiscate cash but other specified valuable items such as betting receipts, precious metals and gems, postage stamps and artworks.

What this all amounts to is a change from the premise of investigating authorities needing to demonstrate guilt to one in which people need to justify possession of assets.

So far, the only substantive mention of this great departure has been a report in The Times of another potential departure; namely, Russian oligarchs who have been suspected of corruption and prefer to return home rather than face the wrath of the UWOs.

Having only come into effect on January the 31st, the powers are so new that no test has yet been made (or, at least, made public) of their effectiveness.

Given their sweeping nature, though, it will be essential that there are checks and balances in place and that the courts carefully consider request by HMRC and other enforcement agencies for them to be granted.

If you have any tax-related queries, please do not hesitate to get in touch with one of our chartered tax specialists.

By | 2018-02-07T22:30:24+00:00 7 February 2018|blog, HMRC, Ryan Conlon|

About the Author:

Ryan is a Chartered Tax Adviser with a breadth of advisory experience ranging from advising entrepreneurial clients and owner-managed businesses on transaction tax issues arising from the disposal and reorganisation of companies to advising land estates and rural businesses on inheritance tax, estate and succession planning, as well as resolving HMRC disputes, enquiries and investigations.

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