Chasing Pennies, Ignoring Pounds: The UK’s Reluctance to Hold the Wealthy Accountable for Tax Fraud

The UK seems to be playing an odd game of hide and seek. HM Revenue & Customs (HMRC) is known for its detailed investigations into tax matters. Yet, last year, out of the roughly 800,000 taxpayers classed as ‘wealthy,’ a mere 11 faced prosecution for tax fraud, as uncovered by the Bureau of Investigative Journalism and TaxWatch.

Let’s put that in perspective: HMRC deems you ‘wealthy’ if you rake in £200,000 or more annually or if your assets exceed £2m. Yet, since 2017, fewer than 100 ‘well-heeled’ individuals have seen the inside of a courtroom for tax matters. Now, juxtapose this with the countless everyday Britons tallying their expenses, deciding whether to turn the lights on or off, to ensure they don’t fall into debt.

Dame Margaret Hodge, representing Barking for the Labour Party, aptly labeled the figure “unacceptable.” Meanwhile, Rushanara Ali, the Labour MP for Bethnal Green and Bow, minced no words in calling the revelation “deeply alarming.”

Phil White, a consultant and member of the Patriotic Millionaires UK, voiced the frustrations many feel: “At a time when families are counting every penny… HMRC should be doubling down on those who can most afford to pay their taxes.” Even more so for those expertly navigating loopholes to skip out on their tax responsibilities.

But here’s the kicker: HMRC isn’t struggling due to a lack of funds. Their budget allocated for probing into the tax dealings of the affluent has seen a significant uptick. From £13.6m in 2016-17 to a whopping £27.1m in 2022-23, that’s a 54% jump in real terms.

So, what’s the catch? Dan Neidle, founder of Tax Policy Associates, gives us a clue. HMRC appears more inclined towards chasing lower-risk civil penalties and settlements rather than diving deep into the expensive realm of criminal proceedings. Neidle argues, “Criminal law is a way more powerful deterrent… With criminal prosecution, you don’t go near it.”

If the goal is to deter tax evasion, then the current approach is failing miserably. The stats show a sharp drop in actions by the Fraud Investigation Service, responsible for pursuing the most grave offenses. From 887 prosecutions in 2016-17, it nosedived to 240 in 2022-23. Criminal convictions? Down from 808 to 218 in the same span.

Margaret Hodge puts forth a critical question: “Where is the appetite from ministers for going after tax dodgers? Who will throw the book at these crooks?” With many families grappling with the decision of whether to warm their homes or feed their stomachs, the urgency to chase those skirting their tax duties has never been greater.

To their credit, HMRC does acknowledge its role in ensuring everyone, regardless of their wealth, pays their fair share. They cite the pandemic as a significant hurdle to prosecution numbers, but one can’t help but wonder if they’re just scratching the surface. Especially when the number of new investigations last year was less than half of what it was at its 2016-17 peak.

In a world increasingly aware of wealth disparities, it’s essential that everyone pays their fair share, and the UK’s reluctance to address tax fraud by the wealthy is, quite simply, a bad look. The message to HMRC? It’s high time to step up the game and ensure justice is served, both for the pennies and the pounds.