Only threat of prison can thwart brazen enablers of  tax avoidance - Greg Wright

When I spoke to Sir Amyas Morse – who led the review into the loan charge – some of his harshest words were directed at those who were continuing to market loan schemes.

It’s time for decisive action. The All-Party Parliamentary Group for Anti-Corruption & Responsible Tax and TaxWatch have published a joint report which outlines how supposedly ‘legal’ tax avoidance could be prosecuted as tax fraud.

The new research paper aims to “explore the myth” that tax avoidance is legal while tax evasion is illegal, and argues that HMRC’s failure to enforce tax fraud laws reinforces this false distinction.

The paper recommends that HMRC changes its approach to enforcement by using existing criminal law to prosecute the advisers behind the most aggressive tax avoidance schemes.

Dame Margaret Hodge MP, chair of the APPG on Anti-Corruption & Responsible Tax, said HMRC should be “enforcing the laws of the land”, and not the rules of the “tax fraud game” which she claimed was allowing tax avoiders and their enablers off the hook.

It’s hard to argue with Dame Margaret’s closing statement: “We need a real deterrent to stop bad behaviour or these tax cheats will continue to flout the rules while most taxpayers struggle with the cost of living crisis.”

MPs, academics and practitioners are calling on the Government to close loopholes which allow egregious tax fraud to go unpunished. According to the report, much that is claimed to be "legal" tax avoidance is actually criminal tax fraud. The relevant criminal offence – ‘cheating the public revenue’ – is extremely wide and MPs believe it could include tax avoiders and the advisers that devise, market and enable tax avoidance schemes.

The report added: “HMRC prioritises cases where there is clear "active deception”, like hiding information or falsifying documents, because of this, tax advisers know they can recommend ineffective tax avoidance schemes with impunity, provided they comply the notional rules of the game by making a cursory effort to present it as legal, with no active deception or concealment.”

The report claims that the lack of fear of criminal sanction removes any real deterrent to this behaviour and so tax fraud, including supposedly “legal” tax avoidance, goes largely unpunished.

It continues: “HMRC cannot keep up with better-resourced lawyers and accountants concocting potentially fraudulent avoidance schemes for their clients, and so many succeed without so much as a second glance, leading to major revenue losses and the undercutting of our public services, like the NHS and police.”

By prosecuting and – in the worst cases – imprisoning the unscrupulous promoters and advisers who are cheating our public services of vital funding we will be destroying this problem at its source.

An HMRC spokesperson said: “HMRC is committed to tackling tax avoidance schemes targeted at individuals and the amount lost through them has fallen by two thirds since 2013/14.

“We continue to make it harder for promoters to sell tax avoidance schemes and to reduce demand – stepping up our efforts to warn individuals about the risks of being drawn in to avoidance, and helping them to get out of a scheme once they realise that they might be caught up in one.”