Redknapp acquittal bruises HMRC but scores handy column inches
After five years of investigation it took a jury just five hours to last week (8 February) acquit Harry Redknapp (pictured) of tax evasion. For Redknapp, clearing his name after the 13-day trial at Southwark Crown Court could leave the path clear to the England manager role recently vacated by Fabio Capello. For HM Revenue & Customs (HMRC), which pursued the high-profile case against the Tottenham Hotspur manager and his co-defendant, former Portsmouth owner Milan Mandaric, the outcome has led to claims that the case should never have gone to trial at all.
February 16, 2012 at 07:03 PM
5 minute read
After five years of investigation it took a jury just five hours to last week (8 February) acquit Harry Redknapp (pictured) of tax evasion. For Redknapp, clearing his name after the 13-day trial at Southwark Crown Court could leave the path clear to the England manager role recently vacated by Fabio Capello. For HM Revenue & Customs (HMRC), which pursued the high-profile case against the Tottenham Hotspur manager and his co-defendant, former Portsmouth owner Milan Mandaric, the outcome has led to claims that the case should never have gone to trial at all.
Press reports put the cost of the case – which saw the men charged with two counts of cheating the public revenue in relation to two payments totalling $295,000 (£188,000) made by Mandaric to Redknapp's Monaco account – as high as £7m (though most tax veterans are sceptical the true figures would be that high).
While HMRC insists the case has cost less than £300,000 and the Crown Prosecution Service (CPS) says that it had paid out just under £1m on legal counsel until the close of 2011, there will be criticism of pursuing an expensive trial for the sake of unpaid taxes worth around $118,000 (£75,000).
Critics argue that HMRC targeted Redknapp as a public figure to make an example of him and send the message to potential evaders that the agency is ready and able to pursue them. As one City tax litigator comments: "It was a small amount to prosecute for and there may be a complaint that he was persecuted for the greater good. It would be fair to say HMRC does not normally prosecute for that amount."
In this regard, while the Redknapp case will not help HMRC's strong conviction rate, which stood at 86% for the 2010-11 financial year, with 336 individuals convicted against 54 acquittals, the outcome could still benefit HMRC. (The taxman has famously had a far more chequered history with high-profile cases, with comedian Ken Dodd and former Portsmouth FC chief executive Peter Storrie being among headline-grabbing acquittals in past tax prosecutions.)
Herbert Smith tax disputes partner Rupert Shiers (pictured) comments: "Even though it hasn't resulted in a conviction, HMRC could well see it as a success, as a large part of its strategy seems to be creating fear in those who may otherwise think they would be safe."
A number of other experienced tax litigators back HMRC's stance. Jason Collins, McGrigors' professional and financial services sector group head, says HMRC was justified in going to trial. "I don't think HMRC can be criticised for bringing the case. There was enough of a case to answer. Redknapp's defence was that he is hopeless with financial affairs – this is a rare area where ignorance of the law can actually be a defence. Taking cases against high-profile people gives HMRC the desired column inches for its prosecution strategy, but the downside is they may charm the jury when put in the stand."
Whether or not HMRC was right to take the case as far as trial, it does underline the more robust efforts to counter tax avoidance and evasion. With the crackdown forming a key plank of the coalition Government's agenda, HMRC was awarded an extra £917m of investment in 2010, which is being used to recruit new criminal investigators, with the organisation planning to bring 1,000 more prosecutions annually by 2015. In addition to upping the number of cases going before the courts, HMRC is also changing its approach to resolving tax disputes, trialling for the first time alternative resolution methods such as mediation.
PricewaterhouseCoopers director Ronnie Pannu comments: "In the last 18 months there have been clear signals that HMRC has increased its resources in criminal prosecutions – particularly for those with offshore funds. The extra money has been focused on tackling avoidance and evasion both for individuals and corporates." And high-profile cases such as Redknapp's cannot hurt HMRC's efforts to get its point across – perhaps explaining why, during the media glare of the trial, HMRC chose to point out the increase in people coming forward to take advantage of the Liechtenstein tax amnesty and the ensuing extension of the scheme by an additional year until 2016.
Other high-profile cases likely to hit the courts this year include a Supreme Court case involving Prudential, which is seeking to argue that legal professional privilege should also apply to tax advice provided by the big four accountants. As Shiers concludes: "We're seeing disputes across all different areas of the tax code. The trend is that wherever there's a point to challenge, HMRC is pursuing it."
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