IR seeks £300m in offshore crackdown

THE Inland Revenue is gearing up for a massive crackdown on offshore tax evaders that could lead to a ten-fold increase in recoveries to £300m this year.

A special force of international investigators is to clamp down on people using offshore accounts to hide taxable money. Experts say it reflects a more energetic approach to revenue collection following the merger of Customs and Excise and the Inland Revenue that was finalised in April.

The £300m target was discussed at a meeting of the Offshore Fraud Project Group (OFPG) earlier this month, the Evening Standard has learned.

The campaign will raise concerns in the City that banks are to be hit with a deluge of orders to provide information about their client accounts. It will also unsettle legal and accounting firms, which may have to justify a myriad legitimate tax avoidance schemes.

Tax inspectors won new powers through legislation introduced in April that better enables them to investigate suspicious transactions involving offshore accounts.

The OFPG is an elite sub-group of about 40 inspectors who are part of one of four divisions of the Customs and Revenue's tax law enforcement group, headed by Mike Eland. Former mmO2 chairman David Varney now chairs the enlarged Revenue.

A Revenue spokeswoman confirmed projected tax recoveries for the coming year had 'come up for discussion' but said there was still to be a 'final decision'. However, sources said the OFPG had brought in just £30m in the year to April 2005 but was looking at 'several hundred million' this year.

Paul Harrison, head of tax investigations at KPMG, said: 'They would not contemplate that unless they have evidence to think it is possible.' That view was shared by Simon Wilks, a tax investigations director at PricewaterhouseCoopers. Both are former Revenue inspectors.

Aileen Barry, also a former Inland Revenue inspector and now at legal giant DLA Piper, said: 'Three out of four investigation cases - civil or criminal - have used offshore accounts.'

The clampdown comes as Gordon Brown looks for additional tax revenues to help plug the budget deficit. Brown committed an extra £66m to the Revenue in 2003 to help recover an additional £1.6bn in tax over three years.

THE PRICE OF EVASION

THE worst-case scenario for tax evaders who get caught and do not co-operate with the Revenue is up to five years in prison for fraud, a criminal record and forfeit of personal assets.

Investigations into possible offenders, including those highlighted by the offshore fraud team, start in the special civil investigations division.

Criminal charges can follow but offenders can get immunity from those and avoid publicity if they make a full confession, pay the tax with interest and a fine of up to 100% of the unpaid tax.

The Revenue has just appointed Roy Clarke, currently head of investigations at the Police Complaints Commission, as its new director of criminal investigations.