Tax avoiders face being shunned for honours such as knighthoods as authorities clamp down on rewarding those with “poor” financial behaviour.
HM Revenue and Customs (HMRC) has been alerting the Cabinet Office to individuals involved in controversial tax schemes, with a memorandum of understanding obtained by The Times saying “poor tax behaviour is not consistent with the award of an honour”.
A document published on the Gov.uk website said the vetting process sees HMRC assign a low, medium, or high risk rating to prospective nominees “to minimise the risk that prospective candidates have behaved in ways likely to bring the system into disrepute”.
The Times said medium risk includes those whose tax affairs would be “likely to cause adverse comment”, such as “participating in one or more avoidance schemes”.
Red warnings are assigned to those on the HMRC’s Managing Serious Defaulters Programme, along with those involved in “offshore evasion”, the report claimed.
The memo is reported to have said: “Trust would likely be lost if an honour was awarded to someone with negative tax behaviours and those behaviours became linked to the positive recognition that accompanies the award of an honour.”
A time limit of three years is said to be in place, meaning candidates can be cleared to receive an honour if they have abandoned avoidance schemes.
Individuals can be nominated despite the “use of personal service companies” or if there affairs amount to “acceptable tax planning”, it is reported.
A government spokeswoman said: “Honours are given to reward outstanding service in a given field or area and each nomination is rigorously assessed.
“As a matter of longstanding policy, in order to protect the integrity of the system, Government departments which may have an interest in a particular nomination - including HMRC - are invited to contribute their views during this process.”
Liberal Democrat leader, and former business secretary, Sir Vince Cable told the BBC: “It seems perfectly reasonable to me that the Inland Revenue should be taking a tough line on abusive tax avoidance.
“I think the public are fed up with abusive tax avoidance by companies and individuals and they want to see something done.”