HM Revenue and Customs is facing legal action over its failure to prosecute hundreds of British customers who used HSBC’s Swiss bank to evade tax.
Online campaign group Avaaz, which claims 40 million members worldwide, has initiated judicial review proceedings against the UK tax office over its decision to offer an amnesty to hundreds of the 3,600 UK customers it identified as potentially hiding money in Switzerland.
OK. So they’re seeking review of the Liechtenstein Disclosure Facility. Essentially, why were these tax cheats allowed to simply cough up and not be prosecuted nor heavily fined?
“In consequence, large sums in penalties have been foregone,” Avaaz states. “Further, HMRC has lost the opportunity to bring criminal prosecutions against those guilty of widespread tax evasion.”
In evidence to parliament this February, the HRMC chief executive, Lin Homer, told the public accounts committee that HSBC customers had been encouraged to use the amnesty. She said 1,100 individuals had settled with HRMC. Asked about the process, she said: “When we talk abut the numbers that went on to settle under this, they will be under Liechtenstein. Of the 1,100, some will already have been in [the LDF] … Some will already have taken themselves into the disclosure, and we think about another 500 went in as a result of us encouraging them to do so.”
This was in front of Hodge the Dodge of course.
Margaret Hodge, former head of Britain’s parliamentary public accounts committee, was among the beneficiaries in 2011 of the winding-up of a Liechtenstein foundation that held shares in Stemcor, the private steel-trading business set up by Hans Oppenheimer, her father.
The shares were brought onshore using a scheme, known as the Liechtenstein Disclosure Facility, that offered reduced penalties and no risk of prosecution for Britons moving undeclared assets back to the UK.
Ms Hodge said she had not been a beneficiary of the Liechtenstein foundation until the shares were brought onshore using the LDF in 2011, and that she had not played a role in setting up or running it.
But the disclosure, reported by The Times, has exposed her to charges of hypocrisy. At issue is whether she should have been more transparent and made a public statement about her interest sooner.
Ms Hodge became one of the UK’s best known politicians in the last parliament by denouncing businesses and individuals over their tax arrangements, and criticising Revenue & Customs for its handling of avoidance. But she has previously made no public statement about the use of offshore vehicles or the LDF associated with the family shareholdings.
Her committee has been particularly critical of the lenient terms offered by the LDF, not least last month during its investigation into alleged tax evasion by clients of HSBC’s Swiss bank.
Just wondrous, eh? Just. Absolutely. Fucking. Wondrous.
So, what Avaaz is really asking for is that Margaret, Lady Hodge, be fined and jailed. Well, let’s be honest here, can’t say fairer than that, can we?
And as a comment on this blog has it (a comment that Ritchie did not allow to be published at his site):
Posted at TRUK – unlikely to survive moderation:
I have to take minor issue with one of the points here.
The only reason for using the LDF is to declare tax evasion, not avoidance. Using the LDF guarantees no criminal proceedings and minimises penalties for the evasion. Avoidance is not illegal, therefore there would be no purpose to using the LDF. I think we can safely assume evasion took place here.
Whomever carried out the evasion, whether Ms Hodge or not, has used this facility to avoid criminal proceedings. I had a similar case with a client and a secretive European trust which we disclosed under the old Swiss regime for similar reasons. She had no idea she was a beneficiary (despite being in her late 80s, early 90s from memory), and the Trust was so secretive is was a nightmare getting information on the income which had been omitted (and, needless to say, which she had not seen a penny of. However, tax doesn’t work like that: as beneficiary, she was obliged to declare the income and pay tax). I don’t believe we ever did find out who the Trustees were; the only reason it came up was the Swiss bank which held the Trust’s funds wrote to her as part of the UK-Swiss agreement going on at the time. How they knew she was involved we never did fully find out..
But I digress. It is entirely possible in my view that Ms Hodge knew nothing about this Trust at all until recently, as she has stated. However, that does not mean that if she was beneficiary she is not guilty of tax evasion. Ignorance is no excuse in the law. I find it less easy to accept at face value that she was not a beneficiary prior to this point (albeit ignorant of the fact): who has she received the shares from? We can only assume it is a close family member (unfortunately random strangers are not in the habit of passing on shares in companies to people they don’t know), in which case why pass shares on to someone in the family who has no need of them (I think it fair to state she doesn’t need the money). It doesn’t pass the smell test that she has only recently inherited shares from a family trust. Who were the previous beneficiaries? In family trusts this would normally be the previous generation. Are they really still with us? Beneficial ownership would have passed to Mrs Hodge on their death.
What this highlights to me in particular is the dangers of strict liability for tax evasion, which I believe you are unfortunately a supporter of Mr Murphy. It is possible, and we have now seen, for people to be unaware of income for completely innocent reasons. But a beneficiary of a Trust must declare to HMRC; to fail to do so is evasion.
Perhaps you might speak privately with Mrs Hodge for the real details. If my suspicions are correct, then I would hope you revise your position on strict liability.
Margaret Hodge, the chair of the public accounts committee in the last parliament, who has since been revealed to have used the Liechtenstein facility to disclose her own tax affairs, criticised the procedure as sending a “really rotten message” to tax evaders.
HMRC’s handling of the Falciani files in effect told them “it’s a risk worth taking”, she said. “The worst that can happen to you if HMRC can be bothered to catch up with you is that you may have to pay, you won’t have a prosecution, you won’t have any shame, you won’t be an example to anybody else, you’ll get away with it.”
I think it would be fair to point out that she said that before she was revealed to have used the Facility.