HMRC’s failed attempt to prosecute football manager Harry Redknapp may have cost the taxpayer an estimated £8 to £10 million. An own goal?

At a glance

  • Redknapp: an expensive trial
  • Costs an embarrassment for HMRC
  • Contrast to Dave Hartnett’s “sweetheart deals”
  • What will happen to stolen list of names of Swiss bank account holders
  • Redknapp outcome wrong foots HMRC when it comes to settlement

After Redknapp was cleared of charges of tax evasion, a spokesman for HMRC expressed “no regrets” over bringing the case to trial. The amount of tax at stake was estimated at under £80,000.

In a discussion on LinkedIn, taxwriter Rebecca Cave, questions whether the publicity from the Redknapp trial is good for HMRC, she says, “After all it proves that you can be acquitted of tax evasion, if you claim not to understand what you were doing.” She also observes that Redknapp is not the first football manager to be acquitted.

It also emerged after the trial that Redknapp’s co-defendant and football chairman Milan Mandaric emerged innocent from two previous tax investigations.

So, who or what pushed HMRC into yet another “Ken Dodd moment”? HMRC now says its costs were just £300,000, however it is estimated by the papers that the cost to the taxpayer of bringing the case to trial and hearing it was £8 to £10 million. Is this too much for the taxpayer to pay for this type of publicity for HMRC?

It seems that the decision to prosecute Redknapp was all about generating publicity though. Although it was clearly a complex case – the trial took 13 days, it would be difficult to see why HMRC would go to court if "the man on the Clapham omnibus” was engaged in suspected tax fraud of just £80k.

HMRC’s Permanent Secretary Dave Hartnett cosy tax settlement deals hit the headlines last year: he let off bankers Goldman Sachs somewhere between £4 million and £20 million (depending on whether you believe the whistle-blower’s estimates) and Vodafone was let off several £billion in another great deal for its shareholders. Hartnett claimed this to be good value for the taxpayer, as it avoided costly litigation. So, we need to really question the judgement of those in HMRC who decided that the sum of just £80k was worth pursuing through the courts. Did the combination of celebrity and football go to HMRC’s Commissioners’ heads?

The other factor to ponder over this outcome is what HMRC will really be doing with the list of stolen names that it acquired from the German tax authorities. The list names the owners of Swiss bank accounts – many of whom, it must be presumed, are persons in the public eye. HMRC has been writing to these bank account holders. The timing of the Redknapp trial could not have been better, although now of course, the timing of the not guilty verdict could not have been worse.

HMRC's list possibly contains the names of the publicity shy rich and the famous, and it wants them to own up and settle any undeclared tax liabilities. HMRC is able to use its Civil Investigation of Fraud (CIF) procedures to agree disclosure and settlement without the tax avoider going through the trauma of a criminal prosecution. These cases will not obtain any publicity for HMRC because they will be settled privately. HMRC wants people to settle under the CIF process, because it is cheaper and more efficient than criminal prosecution.

We are left asking really whether the Redknapp case has done more by way of harm than good? Looking at Dave Hartnett’s deals with big business and the outcome of the Redknapp case, if you hold your ground and threaten to go to court, HMRC might be more likely to give in.

Related content:

Swiss bank accounts: to disclose or not?