This might be because there has been incomplete disclosure or the disclosure of false documents; or that false statements have been made in the COP9 process. In the Ecclestone case, the criminal investigation was initiated on the ground of fraud by false representation.
False representation requires dishonesty, and is different from making a mistake or being negligent. In pleading guilty Ecclestone accepted that information he disclosed to HMRC was untrue or misleading. In this case, criminal proceedings were brought in addition to the civil settlement for unpaid tax, interest and penalties.
Current trends: HMRC's use of data and enforcement powers
This case signals HMRC flexing its muscles and using its full suite of powers, civil as well as criminal. It also shows a determined and committed approach by HMRC to pursuing outcomes, even in challenging circumstances – their investigation has lasted more than five years.
Here, the pursuit of a criminal prosecution – not for tax evasion, but for a manipulation of the COP9 process – demonstrates a particularly strident approach by HMRC.
Notwithstanding the record £653mn civil settlement with Ecclestone (comprising interest and penalties), criminal proceedings were brought and a significant suspended 17-month sentence imposed. HMRC will want this case to have a deterrent effect.
This is in line with HMRC's recently toughened approach, which saw possible penalties increased and introduced new strict liability offences for offshore tax evasion.
The charges against Ecclestone are a reminder that HMRC and other prosecuting authorities are becoming increasingly aggressive in their pursuit of individuals and corporates where wrongdoing is suspected.
The use of data is emerging as a key strategy. Tax authorities are gathering and exchanging more information about offshore accounts held by individuals, which enables them to use data analytics to identify more cases of tax evasion.
As a result of the economic downturn, more pressure is building on government to limit losses to public funds – including tax revenues.
It is worth noting that further prosecutorial tools to tackle tax evasion feature in the new failure to prevent fraud offence, part of the Economic Crime and Transparency Act, which received Royal assent on October 26 2023.
The new law makes it a criminal offence for a company to fail to have in place reasonable procedures to prevent fraud, which includes cheating the public revenue.
This means greater opportunities for enforcement authorities to focus on the investigation and prosecution of tax-related crime.
Ruby Hamid and Nicholas Gardner are partners at law firm Ashurst
