HMRC has vowed to clamp down on tax evaders, following revelations that billions of pounds are being funneled through an offshore haven in Panama, thanks to a network of bankers and accountants based in the UK.
The documents – obtained by German newspaper Suddeutsche Zeitung and shared with the Washington International Consortium of Investigative Journalists (ICIJ) and more than 100 news organisations worldwide – show that senior politicians, high-level businessmen, sports stars, and celebrities have been using law firm Mossack Fonseca to use Panama’s secretive tax laws to shelter money from tax authorities.
According to the documents, the UK has the second-highest number of intermediaries – bankers and accountants – working with Mossack Fonseca, with major British institutions, including HSBC, involved.
Hong Kong-based firms were used the most by the accountancy firm to set up offshore Panama businesses, which can be hidden from tax authorities around the world.
The UK was second on the list, with nearly 2,000 intermediaries.
The schemes are technically legal, and there is no suggestion of wrongdoing by British firms. However, individuals could face prosecution if they misled HMRC and withheld funds that should face taxes.
Mossack Fonseca denies any impropriety, claiming that to blame it would be to blame a car manufacturer for causing a drunk driver to kill someone.
In a statement on Monday, HMRC officials said they were already looking into 700 Panama-linked cases, and a specialist unit called the Fraud Investigation Service is investigating more than 1,100 cases of offshore evasion around the world.
They added that more than 90 suspects are under criminal investigation.
Pennie Granger, director general of enforcement and compliance, said: “HMRC can confirm that we have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation.
“We have brought in more than £2 billion from offshore tax evaders since 2010 and the government has repeatedly strengthened our powers and resources with new criminal offences and higher penalties, so we can take even tougher action against the minority who try to cheat the honest majority by hiding their money in offshore tax havens.”
HMRC has faced repeated criticism from MPs and commentators for its lack of action against offshore tax evasion.
In February 2015, an international group of news organisations led by the ICIJ revealed how leaked files showed HSBC's Swiss bank had helped wealthy clients dodge taxes and conceal millions.
Lin Homer, the organisation’s outgoing chief executive, admitted to MPs that HMRC had found 1,000 likely UK-based tax avoiders in the HSBC Swiss files. However, despite Homer repeatedly telling MPs around 30 cases were being investigated, only one person was prosecuted in connection with the records.
The UK also recovered just £135 million through amnesty deals in connection with those records, less than other countries, despite the UK having more – and richer – HSBC clients.
HMRC admitted in January it had already wound up its investigation into the HSBC Switzerland material. While 10 countries had launched criminal investigations into HSBC or its subsidiaries, the UK did not follow suit.
Tax specialist Jolyon Maugham QC pointed out that tax evasion could lead to a prison sentence.
However, he added: “You go, theoretically at least, to prison for offshore tax evasion. ‘Theoretically’ because HMRC tend not to bring prosecutions for this type of behaviour. As of November 2015 there had been only 11 prosecutions for offshore tax evasion in the last five years.”