Pandora Papers: HMRC issues nudge letters

19 June 2023
Author: Helen McGhee
Helen McGhee

HMRC sends 'one to many' letters to those named in the Pandora Papers haul. 

The Pandora Papers leak of almost 12m documents back in 2021 purportedly exposed the secret accounts and dealings (including potential tax evasion/ avoidance and money laundering) of 35 world leaders (including the late HM Elizabeth II), as well as many politicians and billionaires. The data was obtained by the International Consortium of Investigative Journalists in Washington DC and led to one of the biggest ever global financial investigations.

International cooperation: Increased tax compliance has now very much earned its place on the global stage and strengthening international cooperation is critical to addressing the challenges posed by the Pandora Papers. Tax authorities worldwide have established a network of shared intelligence, joint investigations, and combined efforts of gathering evidence, to uncover complex financial arrangements and identify taxpayers involved in tax evasion.

HMRC activity: Off the back of the scandal, HMRC pledged to take swift action to tackle offshore tax evasion and their reactively appointed dedicated taskforce has presumably been very busy for a couple of years poring over the apparent treasure trove of information, investigating those individuals, corporations, and institutions implicated in the leaked data. The sophisticated technology now available to HMRC enables them to identify patterns, cross-reference data, and detect discrepancies that may pinpoint tax irregularities.

HMRC’s powers to deter and hold accountable those taxpayers found to be delinquent in their tax obligations have been steadily increasing in recent times and penalties can be imposed of up to 200% of potential lost revenue as well as HMRC having the option to initiate criminal proceedings and ultimately impose custodial sentences for deliberate non-compliance.

Nudge letters: HMRC is now actively contacting (via a scattergun approach) those it believes have additional tax liabilities to disclose, giving them 30 days to check and take steps to correct their tax position. It may be that Code of Practice 9/ contractual disclosure facility (as recently updated) route to disclosure may be appropriate in certain high profile or high risk cases as a means to afford the taxpayer protection (many structures that have prompted investigation will have been entirely legitimately established) from criminal prosecution when HMRC may assert dishonest behaviour. Making disclosures to HMRC, particularly of tax fraud and deliberate behaviour, is a specialist area.

The Pandora Papers exposé has increased public awareness of the ongoing global battle for fair and transparent worldwide taxation. HMRC is now finally taking positive enforcement action (commensurate of their strained resources) and capitalising on the opportunity to boost the public coffers, but fair and proper taxpayer representation should never be compromised. 

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