HM Revenue and Customs is facing legal action over its failure to prosecute hundreds of British customers who used HSBC’s Swiss bank to evade tax.

Online campaign group Avaaz, which claims 40 million members worldwide, has initiated judicial review proceedings against the UK tax office over its decision to offer an amnesty to hundreds of the 3,600 UK customers it identified as potentially hiding money in Switzerland.

It would mark the first legal challenge to HMRC’s widely criticised handling of the scandal. The tax office obtained the so-called Falciani list five years ago, giving it a comprehensive database of customers of the Geneva branch of HSBC. But since then the agency has used the information to prosecute only one tax cheat.

Avaaz’s campaign director, Alex Wilks, said: “If the police extended the terms of knife amnesties to criminals caught carrying weapons, the public would be outraged. Tax officials must urgently explain why they gave get-out-of-jail-free cards to so many wealthy tax dodgers.”

HSBC files: Avaaz legal letter to HMRC Read more

In a letter sent on Thursday night, Avaaz called on the agency to explain why HSBC evaders were encouraged to use a process called the Liechtenstein disclosure facility (LDF), which allowed them to pay the tax avoided plus a fine equal to only 10% of the money owed. Had tax inspectors chosen not to use the facility, the letter claims, they could have imposed penalties of up to 200%. Those who opted for the amnesty were also given immunity from prosecution.

“In consequence, large sums in penalties have been foregone,” Avaaz states. “Further, HMRC has lost the opportunity to bring criminal prosecutions against those guilty of widespread tax evasion.”

In evidence to parliament this February, the HRMC chief executive, Lin Homer, told the public accounts committee that HSBC customers had been encouraged to use the amnesty. She said 1,100 individuals had settled with HRMC. Asked about the process, she said: “When we talk abut the numbers that went on to settle under this, they will be under Liechtenstein. Of the 1,100, some will already have been in [the LDF] … Some will already have taken themselves into the disclosure, and we think about another 500 went in as a result of us encouraging them to do so.”

Avaaz argues that the point of tax amnesties is to encourage evaders whose identities are not known to inspectors to come forward. The group claims it was wrongly used in the HSBC case, where names were already known thanks to the Falciani list, also known as the Lagarde list after the former French finance minister Christine Lagarde, who helped distribute its contents to European governments.

The process is named after Liechtenstein because individuals must move their money to the European principality, where their finances are certified by local bankers before being disclosed to HMRC. Other benefits of the facility for evaders include not having to pay tax for years before 1999.

The pre-action letter to HMRC is the first step in a judicial review process which could result in a ruling that the tax office acted unlawfully. HMRC has 30 days to respond to the Avaaz letter, after which the group can apply to a judge to launch the review.

A spokesman for HMRC said: “HMRC will strongly contest any action. We investigated and took action on the Lagarde list effectively.”

Jolyon Maugham QC, the barrister and tax expert who advised Labour on its plans to scrap Britain’s non-dom regime, is representing Avaaz in the case, along with law firm Leigh Day.



“HMRC’s handling of the HSBC leaks has attracted huge public and parliamentary interest,” said Maugham. “The high court should now have the opportunity to scrutinise what tax officials did and didn’t do.”

Other nations have taken strong measures against both HSBC and its customers. France has charged the Swiss subsidiary with fraud and money laundering. It has sentenced French national Arlette Ricci, heir to the Nina Ricci perfume and fashion empire, to a year in prison and is planning further prosecutions. Spain claimed €200m (£146m) in back taxes from the Botín family, which controls Santander bank.

The UK has recovered about £135m from individuals named in the Falciani files to date, compared with about £185m by Spanish authorities and £200m by the French.

Margaret Hodge, the chair of the public accounts committee in the last parliament, who has since been revealed to have used the Liechtenstein facility to disclose her own tax affairs, criticised the procedure as sending a “really rotten message” to tax evaders.

HMRC’s handling of the Falciani files in effect told them “it’s a risk worth taking”, she said. “The worst that can happen to you if HMRC can be bothered to catch up with you is that you may have to pay, you won’t have a prosecution, you won’t have any shame, you won’t be an example to anybody else, you’ll get away with it.”

In a legal opinion commissioned by campaign group Sum Of Us, the former director of public prosecutions Lord Ken Macdonald QC said: “The corporate and wholesale nature of HSBC Swiss’ apparent involvement in what amounts to grave cross-border crime makes it all the more obvious that the relevant evidence, once it came to the attention of HMRC, should have been the subject of urgent and sustained criminal investigation.”

Meanwhile, India’s PTI news agency has reported that the country’s Income Tax Department has begun to close the net on HSBC customers. Prosecutions against 121 entities charged with failing to disclose income were filed in courts in Delhi, Mumbai, Bangalore, Ahmedabad and Goa just before the financial year ended on 31 March, PTI said, and an “action taken” report will be presented to the supreme court by investigators on or before 12 May.

