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September's round up of the latest tax investigation news and cases:
The Spring Statement 2025 provided unprecedented insight into HMRC's strategic plans for addressing non-compliance and collecting outstanding tax debts, marking a significant escalation in the government's approach to closing the tax gap.
HMRC is significantly intensifying its efforts to combat initial non-compliance and recover outstanding tax debts through enhanced penalties for late VAT payments, expanded staffing, and increased resource allocation to debt management operations. Tax advisers found promoting tax avoidance schemes may face suspension from HMRC registration.
For individuals and businesses, this signals HMRC's renewed commitment to enhanced compliance activity, alongside increased penalties for those failing to meet statutory payment deadlines.
The government's comprehensive approach includes substantial investment, clearer behavioural expectations for taxpayers, and deterrent penalties designed to prevent non-compliance. Enhanced investment in HMRC Compliance and Debt Management teams will result in accelerated action against those failing to meet tax obligations.
On 26 March 2025, Chancellor Rachel Reeves delivered the Spring Statement 2025, introducing a comprehensive package of measures targeting the UK's persistent tax gap. Building on the Autumn Budget 2024's demonstration of government commitment to supporting HMRC's tax collection mission, the Spring Statement exceeded expectations for follow-up measures.
While the 2024 Budget outlined government plans for raising tax revenue, the Spring Statement 2025's major development was announcing new HMRC implementation measures designed to reduce tax debt and close the tax gap, aligning with the government's pre-election pledge from April 2024.
HMRC's latest 'Measuring Tax Gaps' publication, released in June 2025, estimated the tax gap—representing the difference between theoretical tax liability and actual collections—at £46.8 billion in absolute terms for 2023/24.
The Spring Statement measures aim to generate over £1 billion in additional gross tax revenue annually by 2029-30.
Government estimates indicate that tax debt owed to HMRC exceeded £44 billion by the end of December 2024, with £20 billion outstanding for over 12 months. The Spring Statement addresses this through investment in HMRC's Debt Management team and enhanced incentives for timely payment via increased penalties for statutory deadline failures.
The Spring Statement 2025 outlines four principal strategies: intensifying tax fraud prosecutions, expanding compliance interventions, raising late payment penalties, and investing in HMRC debt management personnel.
The government's explicit commitment to intensifying tax fraud prosecutions represents a central Spring Statement feature. HMRC announced a target to increase tax fraud charging decisions by 20% by 2029-30 through additional criminal investigations of companies and individuals.
Where HMRC suspects tax fraud, it retains discretion to pursue enquiries through either criminal investigation or civil investigation procedures, including Code of Practice 9 (COP 9) cases. This commitment indicates increased criminal investigations, particularly where civil procedures prove inappropriate or when individuals offered Contractual Disclosure Facility entry under COP 9 fail to make complete disclosures.
Supporting this targeted increase, HMRC is formalising its informant payment approach. While HMRC has always maintained informant payment discretion, distributing £978,256 in 2023-24, the new scheme mirrors US and Canadian systems, rewarding informants with percentage-based payments from recovered tax revenues.
The Spring Statement language provides insight into investigation targets, specifically referencing individuals and companies facilitating offshore money concealment and tax fraud involving large corporation representatives. Though not explicitly mentioned, this suggests increased Corporate Criminal Offence focus from the Criminal Finance Act 2017, which can result in fines and criminal convictions for companies failing to prevent associated person tax evasion facilitation.
To strengthen tax compliance, the government is investing in additional HMRC staff and resources. The Spring Statement announced recruitment of 500 new compliance staff, supplementing the 5,000 positions from the Autumn Budget. This £100 million investment is projected to generate an additional £241 million in tax revenue over five years.
Simultaneously, the government will increase HMRC staff tackling wealthy offshore non-compliance by 400, forecasted to return over £500 million across five years. This involves recruiting wealth management specialists and leveraging AI and analytics to more effectively identify and scrutinise wealth concealment.
HMRC is strengthening its capacity for action against tax advisers facilitating client non-compliance. A consultation ending 7 May 2025 sought views on stronger penalties against tax advisers contributing to the tax gap, including publishing details of those subject to HMRC sanctions, expanding information notices to tax advisers, and sharing adviser information with professional bodies where appropriate.
These proposals aim to influence tax adviser behaviour by disincentivising actions potentially increasing the tax gap.
The consultation reforms follow the Autumn Budget requirement that all tax advisers interacting with HMRC must register from April 2026. HMRC stated this provides compliance enforcement options, allowing suspension of advisers not meeting required standards. These reforms build upon existing powers against 'promoters of tax avoidance schemes' and 'dishonest' tax agents.
Supporting taxpayer compliance, HMRC is developing a transformation roadmap to "deliver the digital services which will mean a better experience for our 35 million individual taxpayers, for agents, and for the more than 5 million businesses in the UK," as announced by the Exchequer Secretary in March. The Transformation Roadmap is expected for summer 2025 publication, outlining HMRC's progression toward full digital tax authority status.
Recognising outstanding tax debt scale, the government is making substantial investment in HMRC's debt management capability. It will recruit 600 additional HMRC Debt Management staff to increase overdue tax debt collection, beyond the 1,800 new recruits announced in the Autumn Budget.
The government will invest £114 million in HMRC's Debt Management team over five years, forecasted to secure additional £2.8 billion in tax revenues during the same period. Beyond internal staffing, plans include £87 million investment over five years in HMRC's existing private sector debt collection agency partnerships to increase collection capacity.
A key operational change involves reintroducing 'direct recovery' powers, enabling HMRC to recover outstanding tax debts directly from bank accounts of individuals and companies with payment means who choose non-payment. This measure targets those aware of their liabilities with settlement ability, reinforcing that deliberate non-payment will not be tolerated.
HMRC, partnering with Companies House and the Insolvency Service, has committed to a joint plan tackling contrived insolvencies, including increased upfront payment demands, making more directors personally liable for company taxes, and increasing enforcement sanctions where 'phoenixism' is suspected.
Late payment penalties currently apply across all UK tax regimes. From April 2025, HMRC increased these penalties specifically for VAT payments, encouraging taxpayers to meet liabilities promptly. Following the Spring Statement 2025, late paid VAT penalties were significantly increased.
Penalties will also increase for income tax self-assessment taxpayers joining Making Tax Digital for income tax. From April 2026, those with self-employment income exceeding £50,000 must file quarterly under Making Tax Digital. From April 2027, this extends to those with income of £30,000 or more. The VAT late payment penalty increases noted above will apply to Making Tax Digital participants. These changes encourage timely payments.
The Spring Statement announcements demonstrate government commitment to introducing measures designed to close the tax gap. For businesses and individuals, understanding potential consequences of non-compliance with tax obligations becomes increasingly critical.
While much of the Statement focused on deliberate non-compliance, HMRC scrutiny will clearly extend beyond intentional behaviour. With increased investment in HMRC's compliance staff, there will be enhanced capacity to detect and challenge broader behavioural ranges, including those arising from misunderstanding or lack of care, particularly regarding income or assets held outside the UK.
Individuals and businesses must proactively maintain accurate records and seek professional advice where uncertainty exists about tax rule applications in individual circumstances. They should also understand various routes for making HMRC disclosures where historic unpaid liabilities are identified. Those failing to maintain compliance obligations could potentially face investigation and significant penalties.
The Spring Statement 2025 represents a watershed moment in the government's approach to tax compliance, signalling a comprehensive, multi-faceted strategy to address the UK's tax gap. The combination of enhanced enforcement, increased penalties, expanded resources, and technological advancement creates a significantly more challenging environment for non-compliance while providing clearer pathways for those seeking to meet their obligations voluntarily.
The mastermind behind one of the UK's largest carousel frauds faces the removal of his properties and luxury vehicle as HMRC secures a multimillion-pound confiscation order following years of investigation.
Sock manufacturer Arif Patel, 61, formerly of Preston, Lancashire, and currently residing in Dubai after evading imprisonment, orchestrated a criminal operation alongside his gang that attempted to steal £97 million through fraudulent VAT repayment claims on false exports of textiles and mobile phones.
The sophisticated fraud operation succeeded for years until HMRC intervened to halt the fraudulent claims, preventing approximately two-thirds of the intended VAT fraud from being completed.
Despite HMRC's success in stopping two-thirds of the fake VAT claims during the 2010s, the criminal gang still managed to steal £33 million from the tax authority and the public through fabricated VAT transactions. Additionally, they imported and sold counterfeit clothing that would have been valued at least £50 million if the items had been genuine.
The full force of the law is now being applied through substantial confiscation orders against both the gang leader and his financial enabler.
Chester Crown Court handed down a confiscation order for £90,503,211.96 against Patel, requiring the sale of his multiple properties across Preston, London, and overseas locations. The order also encompasses his Ferrari 575 Superamerica, which can sell for up to £250,000 and will now be destined for car auction.
Meanwhile, his financial enabler and co-accused from the original 2023 trial, Mohamed Jaffar Ali, 61, of Dubai, who facilitated the gang's financial operations during the height of criminal activity, received a confiscation order for £677,000, despite benefiting from over £1.1 million in proceeds from the crime.
The proceeds from the criminal enterprise funded an extensive property empire, including commercial and residential premises in Preston and London, purchased through offshore bank accounts and companies. Patel's property portfolio also extended internationally, with ownership in Morocco, Dubai, Saudi Arabia, and Turkey.
Richard Las, director of fraud investigation service at HMRC, commented: "Arif Patel lived a lavish lifestyle at the expense of the law-abiding majority, but he will now lose the property empire he amassed from the proceeds of crime. Our work never stops at conviction. For the last two years we've worked with police and CPS partners to secure one of the biggest criminal confiscations we've ever recovered. Tens of millions of pounds of stolen money will now go back to directly fund public services."
Patel operated the organised crime group from Preston in northeast England but evaded imprisonment when he absconded during his trial two years ago, subsequently receiving a 20-year prison sentence in his absence.
Mark Winstanley, assistant chief constable at Lancashire Constabulary, stated: "Arif Patel was the head of a Preston-based organised crime group responsible for causing millions of pounds worth of losses to multiple companies. His actions, motivated by greed directly impacted on the taxpayer. A multi-agency operation involving Lancashire police and HMRC has worked tirelessly to bring confiscation proceedings to this point. Lancashire Police are committed to ensuring that crime doesn't pay and will pursue every avenue to recover monies and assets from those that seek to exploit others for their own gain."
This landmark confiscation order represents one of HMRC's largest criminal asset recovery operations, with the recovered funds set to be redirected toward public services. The case demonstrates the long-term commitment of law enforcement agencies to pursue the proceeds of crime even after conviction, ensuring that criminals cannot benefit from their illegal activities.
The successful confiscation proceedings result from sustained collaboration between HMRC, Lancashire Constabulary, and Crown Prosecution Service partners, highlighting the effectiveness of coordinated law enforcement efforts in tackling sophisticated financial crimes.
The case serves as a significant deterrent to others contemplating similar VAT fraud schemes, demonstrating that authorities will pursue both criminal conviction and comprehensive asset recovery to ensure that crime does not pay.
What characterizes tax crime and evasion in the modern era? And what effective measures can be deployed to combat these evolving threats?
Simon York CBE, a former Director of HMRC's Fraud Investigation Service who dedicated his career to tax and financial investigation, currently serves as a strategic advisor with Deloitte. He delivered this year's CIOT Address on 'Tackling tax crime – 21st century solutions', providing crucial insights into contemporary enforcement challenges.
For those seeking employment stability, careers focused on tackling tax evasion offer considerable security. Since the inception of tax, duties and tariffs, individuals have consistently devised methods to avoid payment. The concealment of transactions, wealth and assets has remained a fundamental characteristic of tax crime for centuries—regularly depicted through anonymous numbered Swiss bank accounts as plot devices in numerous novels and films.
The Panama Papers leak in April 2016 significantly elevated public awareness of these issues. While the revelations extended beyond taxation matters, the global scope, involvement of household names, and vast sums of money exposed the industrial-scale use of shell companies. It became evident that much of this activity was orchestrated by unscrupulous professional advisors and facilitators.
In the UK, the latest annual tax gap estimate stands at approximately £46.8 billion. In comparison, the US faces around £700 billion. While not all of this represents evasion, a substantial proportion results from deliberate behaviors. Tax evasion is inherently concealed and challenging to quantify. In the UK, probably more than £15 billion annually, and possibly significantly more, stems from evasion or criminal behaviors.
The enormous sums involved, which could otherwise fund public services, represent a critical motivation for combating tax crime, but additional factors are equally important. Citizens must pay higher taxes to compensate for amounts unpaid by evaders and criminals. However, tax crime creates more direct victims. Some individuals have lost state pension credits due to payroll fraud. Others believed they had paid stamp duty only to discover their solicitor submitted false documents, underpaid duty and retained the difference. Shopkeepers face threats from organised crime groups to sell illicit, non-duty paid products or risk business closure.
Maintaining public confidence in the tax system is essential. Diminishing trust leads to reduced voluntary tax compliance. Honest citizens and legitimate businesses must be assured that tax administration can effectively address rule violations.
Clear deterrent messages must be sent to specific individuals and sectors that improper tax behavior can result in life-changing consequences.
How does tax crime or tax evasion appear in the 21st century? The following examples illustrate modern tax crime evolution:
Nearly every case handled by HMRC Fraud Investigation teams contained international elements—significantly more than 20 or 30 years ago. Investigations encompassed cross-border transactions, offshore banks, trusts and companies, and every variety of legal entity based in secrecy jurisdictions or tax havens. Some crime groups essentially operated as international businesses with comprehensive logistics, inventory and financing.
Most tax organisations now operate predominantly digitally or online, making them substantial targets for fraudsters. Technology generally represents a significant factor enabling tax crime:
There has been massive increase in financial complexity—blending traditional crimes involving cash, property and gold with crypto assets, alternative banking platforms and the ability to move money across multiple jurisdictions within hours. Deliberately lengthy and opaque supply chains have become key elements in growing numbers of tax crime types.
This creates enormous challenges for governments and tax administrations. Tackling such criminal activity requires detecting crime initially, working at requisite pace, developing or hiring necessary skills and talent, ensuring cross-border investigation capability, procuring or developing appropriate technology, and ensuring access to intelligence needed for actionable insight.
Several specific approaches merit consideration, illustrated through practical examples—one unsuccessful and one successful.
Deterrent Prosecutions: A Cautionary Example
In 2011, the coalition government sought enhanced evasion and avoidance tackling. Significant HMRC staff investment addressed non-compliance through new teams, legislation and approaches.
One approach involved 'volume crime'—prosecuting 1,000 additional people annually to create deterrent effects and prevent tax evasion. This proved enormously challenging for HMRC, the Crown Prosecution Service and the criminal justice system generally.
While targets were met, this came at considerable cost regarding other important and probably more impactful resource applications. Ultimately, it made minimal difference to overall tax evasion scale and value.
Multi-Faceted Approach: Carousel Fraud Success
More encouraging was the response to missing trader or carousel fraud—complex VAT fraud involving goods or intangibles circulating through lengthy supply chains before chain segments disappeared with VAT. Organised crime groups perpetrated this, costing over £4 billion annually at its height—money typically flowing overseas into property, gold and other offshore investments.
HMRC initially attempted to investigate and prosecute through this threat, which nearly crippled enforcement activities while making negligible difference to overall fraud volume. A multi-faceted approach was developed, including hardening departmental repayment processes, tightening VAT registration, introducing sophisticated real-time risk rules, and seeking EU law derogation to prevent fraud using criminals' preferred commodities.
Specialist teams monitored suspicious traders and educated businesses in high-risk sectors. Simultaneously, illicit supply chain segments enabling illegitimate trading were targeted using civil investigation powers, resulting in substantial fines and director disqualifications. Criminal justice interventions—criminal investigation and covert intelligence collection—were reserved for fraud masterminds. This comprehensive system approach reduced fraud threats by over £3 billion annually.
Clear strategic intent is essential—understanding action motivations, maximizing tax crime impact, and utilizing all system elements to achieve objectives.
Investigating individual evasion instances is unlikely to achieve desired outcomes. However, criminal investigations play vital roles in overall tax crime strategies and are crucial for driving behavioral change. They can alter risk/reward ratios for wealthy individuals or corporates who might avoid crossing lines if perceiving jail time risks as excessive. They can also impact sectors with widespread tax evasion.
Sometimes only criminal investigations enable insight into fraud perpetrators and their methodologies to understand actual activities.
Focus can target enablers or facilitators with disproportionate evasion impact. Tax administrations could act more quickly and aggressively to remove the most harmful actors before they create inevitable victims of failed schemes.
HMRC possesses significant data and intelligence capabilities. The department ranks among the UK's largest data holders, managing citizen information from birth to death—from child benefit to inheritance tax.
Much data feeds into Connect, HMRC's comprehensive data matching system. This includes information from millions of individual taxpayers and businesses, plus property ownership details, credit and debit card totals for all UK businesses, online platform data, banking information from over one hundred countries, cross-references to previous data leaks, and more.
HMRC also maintains significant investigatory and covert powers for surveillance, informant use, and phone call or email interception. Tax administrations could act more aggressively, utilizing every available tool to target key facilitators, corrupt professional advisors and professional money launderers.
Additional data and intelligence prove useful in tackling modern tax fraud. This requires ambitious private sector partnerships to leverage an increasingly transparent world—whether collaborating with banks to understand and prevent financial crime, accessing specialist crypto and blockchain investigation capabilities, or utilizing private sector data aggregators for worldwide ultimate beneficial owners of corporate entities or property.
Government cannot accomplish this independently, requiring new cultures welcoming such partnerships.
International collaboration extends beyond OECD policy initiatives to ensure more direct and timely operational cooperation between tax administrations and law enforcement.
A lesser-known fact: HMRC maintains officers in 40 embassies or high commissions in key global jurisdictions—officers coordinating action and gathering intelligence from international partners.
The J5 exists—which York helped create—where UK, US, Dutch, Australian and Canadian tax enforcement teams share intelligence, coordinate international investigations and develop mutual capabilities. As tax crime becomes increasingly international, continued investment in such collaboration is critical or tax enforcement will fall behind sophisticated and internationally mobile criminals.
Tax administrations like HMRC require appropriate resources and skills. From direct experience, HMRC could achieve more with additional resources. However, HMRC's compliance division already employs around 28,000 staff—a substantial number by any comparison. Therefore, ministers must challenge departments to maintain proper focus, strategic intent and technology ensuring maximum efficiency.
Staff skills equal numerical importance, whether significantly improving and modernising internal training or purchasing necessary expertise. This represents possibly the most critical issue.
Tackling tax crime is challenging work, and HMRC performs much very well. However, challenges continue becoming increasingly difficult. Ministers and senior tax administration officials—in the UK and globally—need laser focus on this most deliberate non-compliance type. It requires proper resourcing and increasingly active and creative partnerships with public and private sector organisations.
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