AML / CFT: UK Revenue uses civil process instead of proceeds of crime law

The arrests and investigations have taken place during a campaign targeting plumbers which invited them to put their tax affairs in order. Some of those involved owe up to £150,000.

This is the start of co-ordinated action and more raids are expected to take place over the coming weeks across the UK, including Yorkshire, Kent, Cambridgeshire, Tyne & Wear, Midlands and South Wales.

HMRC is desperate to come up with some media friendly buzzwords and so it has termed those who do not declare their income to be "ghosts."

HMRC instigated a high profile publicity campaign warning plumbers that the industry was under surveillance. That was backed with a form of amnesty: under the "Plumbers Tax Safe Plan" (PTSP), plumbers, gas fitters, heating engineers and members of associated trades who owe tax that they had not declared faced a penalty rate of only 10 per cent, with a maximum of 20 per cent if they disclose in full. They have until 31 August to arrange for payment.

But the time for making the declaration has expired and although the guarantee of terms within the PTSP are no longer on offer, HMRC has left the PTSP disclosure route open for those in the plumbing industry who have unpaid tax to disclose but who have still not come forward.

John Pointing, Assistant Director, HMRC Criminal Investigation, said We provided a chance for those we have arrested, and the 600 we are investigating, to come forward voluntarily and put things right. These arrests send a clear message that HMRC will take action against those who choose not to come forward and pay the tax they owe.”

But it is the question of civil investigation that will raise eyebrows for it suggests that HMRC does not intend to use the UK's counter-money laundering - and asset recovery - laws. That suggests that either deals will be struck or penalties imposed with the failure to meet those penalties being enforced through the insolvency route formerly favoured by Customs and Excise.

With a second campaign aimed at those evading Value Added Tax under way as from earlier this month and future campaigns aimed at those providing private tutoring and, later, e-marketplaces, HMRC's approach of targeting industries rather than random individuals has the benefit of impact and, therefore, increasing the likelihood of declarations.

By working outside the proceeds of crime regime, and operating through insolvency, HMRC can short-circuit most of the delays inherent in the civil recovery regime under the Proceeds of Crime Act and its (partial) successors. And if it is found that the target fails to disclose assets in the insolvency, that is a predicate crime under the UK's counter-money laundering laws, leaving HMRC with a second bite at the cherry.

Is the strategy devious or clever? It's probably the latter. It's ruthless, effective and very neat.