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Tax Crackdown to Target Middle Class

Caroline Binham

Middle-class professionals are to be targeted in a new crackdown on tax evasion promised by the chief prosecutor of England and Wales.

The Crown Prosecution Service will dramatically ramp up the number of tax evasion cases it takes on – with a view to prosecution – over the next two years, Keir Starmer, the director of public prosecutions, told the Financial Times. The CPS will increase five fold the number of tax files it handles, to 1,500 a year by 2014-15.

This compares with 200 tax convictions the CPS secured in 2010 – its current conviction rate for tax cases stands at 86 percent.

Tax consultants who push dishonest avoidance schemes – and the professionals who invest in them – are central targets in the strategy.

"There have been some cases involving lawyers, some involving tax consultants, and plumbers," Mr Starmer said in an interview. "Within the ramped-up volume, it's intended that we will select cases to send a clear message as to the breadth of our coverage."

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His comments come amid wider scrutiny of the tax affairs of household names, both corporate and celebrities, as the prolonged financial downturn causes aggressive but legal tax avoidance to attract widespread criticism, as Starbucks found to its cost last month.

Goldman Sachs became the latest multinational company to attract negative headlines: last week it rowed back on proposals to delay awarding bonuses to its U.K. bankers until the next fiscal year in order to benefit from a cut in the top rate of tax.

Mr Starmer will telegraph the CPS's new approach in a speech on Tuesday. He is expected to dispel the idea of tax evasion as a victim-less crime, stressing that tax cheats cost each household the equivalent of 533 a year.

The CPS's tougher stance matches that of HM Revenue & Customs – which investigates cases before referring criminal files to the CPS – as both organisations try to rein in the 14bn a year that the economy loses from tax evasion. HMRC's prosecution office was merged into the CPS in 2010.

"This represents a significant policy shift. Historically the Revenue has been a reluctant prosecutor, preferring to concentrate on tax collection and bringing deterrent prosecutions only in the most blatant cases," said Jonathan Fisher QC, a barrister who specializes in tax cases.

In targeting those who invest in schemes or do not declare their full income, Mr Starmer has chosen what could be labelled low-hanging fruit.

It is carousel fraud that haemorrhages the most money from the economy, estimated at 6bn a year, making it the biggest single source of tax evasion. Organised criminals operating across borders are often behind such scams, making them difficult to prosecute.

"Middle-market cases are easier to prosecute and they don't cost as much," said Tessa Lorimer, a former Revenue prosecutor now at GSC Solicitors. "They attract a lot of publicity, and hence achieve a lot of deterrence."

Additional reporting by Vanessa Houlder