On 2 December 2020 HMRC published a research report by IFF Research aiming to reach an improved understanding of the situation of wealth managers, UK goods importers and freight forwarders who may be in a position where they are at risk of facilitating or enabling tax evasion and avoidance.

Around 47% of the freight forwarders surveyed and 14% of importers expressed concerns about importing activities especially around incorrect classification of goods and incorrect descriptions of goods. A minority of businesses had reported certain activities to HMRC, such as incorrect classification of goods (26%) or more broadly suspicious activities (52%). More commonly when encountering activities that could be incorrect or suspicious freight forwarders would inform the client of their findings or inform the organization the goods were imported from.

Only a small proportion of wealth managers (13%) said they had suspicions or concerns when performing “know your customer” anti-money laundering or due diligence checks, and most emphasized that such suspicions were very rare. When encountering suspicious activities they would normally report these to HMRC or another relevant authority such as the Financial Conduct Authority (FCA), or they would report to a higher level within their organisation.

Around 12% of wealth managers had been asked by clients to provide advice that might be perceived by HMRC as contrary to the intentions of the tax law, but only 3% reported providing such advice to clients. It was fairly common to advise clients that they might be committing an offence but none of the wealth managers surveyed had reported such situations to HMRC or another authority. A few suggested that their attitudes had changed as a result of negative experiences, increased regulation or landmark cases.

Prevention Procedures

Most wealth managers and freight forwarders in the survey considered that they demonstrated good practice in measures to prevent the facilitation of tax evasion. UK importers did not appear to be so rigorous in their approach but still demonstrated good practice.

Awareness of Sanctions

Wealth managers were generally well aware of most sanctions, and freight forwarders were well aware of the sanctions except for the power of disclosure to the media of names of organisations that have been involved in facilitating or enabling duty or VAT evasion. UK importers were slightly less aware of the sanctions, and a lower proportion of them were aware of the possibility of the removal of authorisations as a sanction (only 69% were aware) or of disclosure to the media (only 55% were aware).

Recommended sanctions

Most businesses surveyed considered imprisonment of individuals complicit in evasion to be the most effective sanction. Businesses considered that financial penalties and repaying tax owed with interest were the most likely sanctions but that determined offenders may not be deterred by them.

The removal of authorisations would be an effective deterrent to companies operating in a particular sector. The Corporate Criminal Offence (CCO) was also considered effective as it incorporated a number of the other available sanctions. With regard to disclosure to the media, some businesses feared negative publicity and reputational damage but some felt that the public generally quickly forgot such adverse publicity.

Other sanctions thought effective by businesses included actions to stop evasion at source by HMRC targeting particular tax schemes, and stronger enforcement of current available actions. Increased regulation and more licensing requirements were recommended by some businesses. Also more assistance and education from HMRC would be appreciated.