The UK’s general election has been set for July 4, with Labour predicted to win by a landslide. Labour have promised to crack down on tax evasion. 

The tax gap in Britain, i.e., the gap between tax owed and tax paid, stands today at £36bn. Labour believes that the current government has no plan to bring it down and that the deterrent effect of prosecutions and pilates is too weak, with falling numbers of criminal investigations for tax evasion. Also, Labour says that the current government’s plans to digitise the tax system for the modern age are floundering.

The current government only has plans to recover £1bn a year in outstanding tax debt, even though the head of the National Audit Office says that there is £6bn annually that could be recovered if there were a concerted effort on tax compliance.

Although not announced at Conference, senior Labour politician Dame Margaret Hodge and chair of the All-Party Parliamentary Group for Anti-Corruption has demanded more action against legal tax avoidance and loopholes. She wants criminal prosecutions of aggressive tax avoidance, and is likely to push for more corporate criminal sanctions against tax avoiders.

Labour says that their plan would: 

• Boost compliance activities in HMRC, recovering more tax revenues from those seeking to avoid it.

• Invest in technology transformation in the tax system to improve the customer experience and reduce the tax gap.

• Make legal changes to support this effort, restoring a genuine deterrent to tax evasion and making sure people pay their taxes in the first place.

Labour believes that these changes would raise  £5bn a year by the end of the parliament. They also promise to further the work to modernise the HMRC and digitise the system, a process that will help reduce the tax gap from error and avoidance as well as improve the experience for individual taxpayers and drive productivity gains for businesses.

With a projected Labour government promising to clamp down on tax evasion, organisations large and small should make sure they’re tax compliant and prepared.

How does tax evasion occur?

There are many ways facilitation of tax evasion can occur. Even simple, every-day actions could enable tax evasion to occur. Take a look at this common list of tasks and think about how frequently you engage in these activities.

1. Processing payments to third parties
2. Dealing with vendors and suppliers
3. Conducting due diligence on third parties
4. Communicating and dealing with third parties based in offshore jurisdictions
5. Opening bank accounts
6. Operating IT infrastructure
7. Providing assistant or secretarial services third parties
8. Conducting currency conversions
9. Sending money to foreign locations
10. Providing tax advice
11. Providing company director services
12. Providing nominee services
13. Setting up or maintaining services in offshore jurisdictions
14. Being involved in property transactions

If you are regularly involved in two or more of these areas, you have high exposure to potential facilitation of tax evasion. This means you might often encounter scenarios in your day to day job that could present a high risk of facilitating tax evasion. 

What you can do about it

You can mitigate these risks by paying close attention to certain identifiable red flags. Being vigilant about potential risks of facilitating tax evasion is vital to protect you and your business from the risk of being embroiled in tax evasion.

Training is one of the most effective reasonable procedures any prosecutor would look at when reviewing a breach of the law. Remember that some staff should be trained more than others. Anyone who is high risk, e.g. they engage in two or more of the high risk areas on a regular basis, should be undertaking comprehensive tax evasion training at least once a year.

VinciWorks tax evasion training

Our tax evasion training suite brings together gamified, customisable and relevant learning to form the ultimate tax evasion compliance solution.

With our in-browser editing tool, you can now tailor any of the courses in real-time to align with your tax evasion policies. All edits can easily be shared with your colleagues via a unique link.

Compliance and the UK General Election – Special Webinar

Every sector could be impacted and every area of compliance is likely to be reviewed by the next government. From overhauls of financial services regulation, reviews of data protection law, closer alignment with EU regulations and an expansion of health and safety protections, the next parliament will see compliance at the centre of the regulatory agenda.

With everything from whistleblowing reform to overhauls of corporate governance, new employment rights like menopause leave and expanded equal pay rules, alongside crackdowns on tax evasion and expansion of the money laundering regulations, organisations large and small should prepare for the outcome of the general election.

This webinar will cover:

• What the main parties are pledging on key compliance areas
• Potential changes to legislation including the Equality Act, sexual harassment and employment rights
• Expected legislation on AML, bribery, sanctions, fraud and economic crime
• Possible expansion of regulations around GDPR, AI and health and safety
• Preparing your organisation for future regulatory changes and new requirements