Introduction

One of the more ‘memorable’ scenes in the epic TV series Game of Thrones was Cersei Lannister’s Walk of Shame. In season five, Cersei is paraded across King’s Landing by the High Sparrow, as punishment for an incestuous relationship.

Where Cersei had instead been accused of fudging her tax return or, even worse, had promoted a tax avoidance scheme, then this is probably a tactic that HMRC would see as wholly reasonable punishment. Indeed, it might have been inspiration for a series of measures that have seen tax miscreants named and shamed and put on display like curios at a Victorian carnival.

In this two part article I discuss the use of so-called ‘name and shame’ by HMRC.

Serious criminal offences & name and shame

However, before we look at these tax-related measures, let’s put the issue into context within the context of the wider legal system.

It is a core principle of our criminal justice system that the court sits in public. That said, there are some reporting restrictions that can apply – for example, around youth offenders.

Of course, this does not mean that lists of offenders are published in the daily newspapers. Indeed, ever since Elizabeth Fry walked into a stench-ridden Newgate prison, the custodial system has not simply been a means of inflicting retribution on offenders.

That said, since 1997, anyone cautioned or convicted for a sexual offence is put on the sex offenders register (SOR). Those within its remit are required to provide specific information at registration. Failure to comply with this is a separate criminal offence.

Someone who receives a caution remains on the register for 2 years. Where the person received any custodial sentence then their details remain on the register from 5 years to indefinitely.

However, famously, these details are not made public.

Indeed, it took the campaigning of Sara Payne, the mother of Sarah Payne for the introduction of the child sex offender disclosure scheme (sometimes called ‘Sarah’s Law’). This allows parents, carers or guardians to formally ask the police for information about a person who has contact with their child if they’re concerned the person may pose a risk.

There is perhaps a strong public interest in knowing whether certain serious, violent and sexual offenders are living on your street or working next to you in the office. However, one assumes that the rationale behind restricting this information is:

• that someone who has served their sentence then they have been punished for their crimes;
• it might well be that, particularly in the case of certain sex offenders, the revealing of this information might result in the public taking reprisals.

However, although physical branding was abolished in 1829, when it comes to tax, name and shaming is perhaps the modern equivalent.

Breaches of National Minimum Wage (“NMW”)

The introduction of the NMW was a significant move by Tony Blair’s Labour government.

Of course, there is little point in bringing these laws to the statute book if there is no enforcement of the rules or sanctions for those who break them.

Although compliance with the rules is a legal matter, its enforcement is largely a civil one. From April 2016, the government increased the penalties imposed on employers that underpay their workers in breach of the minimum wage legislation from 100% to 200% of arrears owed to workers.

HMRC’s enforcement teams are invested with powers that enable them to conduct criminal investigations into suspected offences under NMW legislation. Of course, whether the case is prosecuted will ultimately be determined by the Crown Prosecution Service.

But what about “naming and shaming”? After all, it’s what this article is about.

From 1 January 2011, provision was made for employers who break NMW law to be publicly named. HMRC guidelines state that:

“The objective of the naming scheme is to raise awareness of minimum wage enforcement and deter employers who would otherwise be tempted to break minimum wage law. The government recognises that some employers are more likely to respond to the social and economic sanctions that may flow from details of their payment practices being made public, than from financial deterrents.

If there has been a breach then an employer will be issue with a Notice of Underpayment. An employer in receipt of such a notice has 28 days to pay all arrears to workers and the full penalty. A bit like a parking ticket, they can take advantage of a 50% reduction in the penalty charge if they pay both the arrears and the penalty within 14 days.

Subsequently, HMRC will then refer the details of the case to BEIS. It is this body that then decides whether, after paying the penalty and arrears, the case is worthy of being named and shamed.

If an employer appeals then they will not be referred to BEIS to consider naming and shaming until the appeal is decided and is unsuccessful.

Although not mentioned in the passage above, it is assumed that one additional benefit that might arise as a result of this process is that it might encourage more workers who have been underpaid to come forward.

It is interesting that naming and shaming appears to have had a hiatus between July 2019 and December 2020 due to “ministerial concerns”. From December 2020, the procedure recommenced.

Employers can make written representations to BEIS outlining whether they fall under any of the exceptional circumstances for not being named under the scheme. The exceptional circumstances are:

• “Naming by BEIS carries a risk of personal harm to an individual or their family.

• There are national security risks associated with naming in this instance.

• Other factors which suggest that it would not be in the public interest to name the employer (employer to provide details)”

I understand that, in practice, BEIS is reluctant to agree that cases fall within these exceptions. Indeed, over 200 businesses have been named under these provisions, including John Lewis, The Body Shop and Sheffield United Football Club.

Deliberate Defaulters (read tax evaders)

Prior to April 2020, HMRC was only able to publish details of taxpayer that were convicted of a criminal offence.

It now has the power to publish the names and addresses of any individual or company who has been penalised for deliberately failing to notify of any tax due.

Under the legislation introduced by Finance Act 2009, s94, HMRC publish details of deliberate tax defaulters. HMRC’s guidance states the following:

We may publish information about a deliberate tax defaulter where:

• we have carried out an investigation and the person has been charged one or more penalties for deliberate defaults
• those penalties involve tax of more than £25,000

Their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults.

We will publish enough information to identify the:

• deliberate tax defaulter
• penalties imposed for their deliberate defaults
• amount of tax on which those penalties are for

We publish this information once these penalties are final. A penalty becomes final on either the:

• day after the end of the appeal period if the person does not make an appeal
• date when an appeal is finally determined
• date when a contract settlement is made

The law requires that we do not publish any information about the person for more than 12 months from the date we first publish it. The lists of deliberate tax defaulters will not be captured for the National Archives.

As with the process under the NMW, naming and shaming cannot take place until the taxpayer has exhausted his or her rights to appeal (or chooses not to do so).

The information that HMRC may publish is as follows:

• “the name of the person who incurs the penalty including any trading name, previous name or pseudonym

• the person’s address (or registered office, in the case of a company)

• the nature of any business carried on by the person

• the amount of the qualifying relevant penalty or penalties

• the qualifying potential lost revenue (PLR) in relation to the qualifying relevant penalty, or the total of the qualifying PLR for all of the qualifying relevant penalties

• the periods when the inaccuracy, failure or wrongdoing that gave rise to the qualifying relevant penalty or penalties occurred

• any other details that HMRC considers necessary in order to make the person’s identity clear”

As reported by the Telegraph[1], ex-England footballer Emile Heskey has found himself on the Deliberate Defaulters list after having a penalty imposed by HMRC of almost £42,000. That report tells us that he defaulted on £92,161 of tax while working as a “football development officer” between April 2017 and April 2020.

In the report, we are told by a HMRC spokesman that “this is about influencing behaviour by encouraging defaulters to engage with HMRC” and that “the Government is serious about tackling evasion and non-compliance by ensuring everyone pays their fair share, creating a level playing field for honest people and businesses, and cracking down on the minority who seek to evade tax”.

If naming and shaming is the deterrent, then it begs the question of what the penalty is designed to achieve

Of course, for the rich and famous, the publication of an address is potentially a problem. Indeed, albeit back in 2008, as reported[2] by Reuters, Heskey’s then fiancée was “robbed at knifepoint after two men smashed their way into the striker’s home in northern England, the Premier League player said on Wednesday”. Now, clearly, the publishing of Heskey’s details did not lead to him being robbed. However, it is not difficult to imagine that the publication of such details might lead to such consequences.

More recently, former Manchester City manager, Manuel Pellegrini was also added to this list of fiscal miscreants.

Arguably, the deliberate defaulters list is perhaps only a deterrent to those with a high profile. I think it fair to say that, celebs excepted, this list has long become an irrelevance (only cited by BeanCounterzWeb.com[3] on a particularly slow news day!)

Tax agents and dishonest conduct

From 1 April 2013 HMRC was given new powers, which apply across all taxes, to take action against those tax agents it determines as having engaged in dishonest conduct.

These powers include the ability for HMRC to access their working papers to determine the extent of their dishonesty. The new rules have effect for dishonest conduct on and after 1 April 2013.

In addition, and relevant to this article, is that HMRC may also publish the names of tax agents who have been penalised under those dishonest conduct new rules.

In this article’s second part, I discuss how HMRC has recently used ‘name and shame’ against tax avoidance promoters.

 

If you have any thoughts or queries about this article then please let me know.

 

[1] https://www.telegraph.co.uk/football/2022/07/14/former-england-star-emile-heskey-placed-deliberate-tax-defaulters/

[2] https://www.reuters.com/article/uk-britain-heskey-fapl1-idUKL3103884020080723

[3] Apologies if there really is a website of this name!