Revenue hunts corporate fraud

The Inland Revenue is diverting more resources to investigating corporate tax fraud, which could spell increasing danger for lawyers and other professional advisers who are inadvertently involved, say tax specialists.

Such work is already big business. According to the latest annual report, the revenue's special compliance office (SCO), which investigates suspected serious fraud and tax evasion and avoidance, won u348.3 million in settled cases in 1993/94.

The report says: “In cases of serious fraud, the department has continued its policy of prosecuting in those exemplary cases most likely to serve as a deterrent.”

It points to the successful prosecution of Nissan UK Ltd and the widespread publicity the case generated.

Success rates for the SCO could be higher in the coming year. A programme for restructuring the SCO, with the introduction of integrated offices, began this year and should be completed in 1994/95.

“This will provide opportunities for more effective working of cases, particularly those of higher quality,” according to the report.

Meanwhile the revenue's special investigations section, which carries out major corporate investigations, yielded u41 million for the year.

“The department is committed to maintain, and increase, the level of its action against non-compliance and to make the most effective use of its resources. Additional funding coupled with efficiency savings has now enabled more resources to be put into compliance activities from 1994/95 onwards,” says the report.

A spokesman says the revenue is budgeting for an extra u21 million over the next three years in order to employ more inspectors for the SCO.

This increased activity could mean trouble for lawyers, as the revenue affirms its intention to get tough with professional advisers who are involved in tax evasion.

A case in point is that of tax barrister Bernard Cunningham and a number of accountants who were all recently jailed after a record six-month trial in Nottingham Crown Court.

Martin Bridges, Touche Ross partner in charge of investigation services in the tax and forensic accounting department, says the report shows the revenue's increasing specialism and resources for City-type investigations.

Bridges, formerly of the revenue's SCO inquiry branch, says: “They are going for professionals, and large public multinational companies – once the sacred cows, these are now being targeted because they have deep pockets.”

Bridges warns professionals advising businesses of the dangers of inadvertently being drawn in to tax frauds perpetrated by clients. “The dividing line between evasion and avoidance is becoming more difficult to ascertain and extremely dangerous to cross.”

Jill Hallpike, secretary of the Law Society's revenue law committee, says solicitors should consult a tax expert such as another solicitor, counsel, or an accountant if they have any doubts about a particular client's situation.

The total figure collected from investigation, audit and review work was u4.7 billion in the year to 31 March 1994 – the second highest ever total.