OFFSHORE ASSETS TO BE CRIMINALISED?
The Treasury is to consult on plans to introduce a new criminal offence for offshore tax avoidance which could see those with undeclared foreign income face the possibility of a prison sentence say Harris & Co accountants Northampton.
The prison sentence would be in addition to even larger fines than is currently the case, even if the individual did not intend to evade tax.
Unlike the current regulations, whereby HMRC must prove someone holding undeclared offshore income has intended to evade tax, under a new criminal standard it would only be necessary to show that the money was taxable and undeclared.
HMRC’s most recent analysis suggested that £10bn of the current ‘tax gap’ is down to evasion and avoidance.
HMRC has published a new briefing document aimed at taxpayers, called ‘No safe havens 2014’, in which it confirms it will consult later this year on a new strict liability criminal offence of failing to declare taxable offshore income, saying anyone who does not declare offshore income could face an unlimited penalty, and a prison sentence.
The document states that failure to declare income and gains arising offshore can already be met with penalties worth up to 200% of tax evaded, and that the planned consultation will look at strengthening the civil sanctions available for tackling offshore non-compliance.
The options under consideration include extending the scope of the offshore penalties regime to align across personal taxes and deter the use of offshore accounts to hide the proceeds of domestic evasion; deterring the deliberate movement of assets to avoid international agreements which tackle offshore non-compliance; and updating the offshore penalties regime to reflect the new global standard of automatic exchange of tax information.
In his introduction to the document David Gauke, exchequer secretary to the Treasury, said:
‘We will legislate to implement the new OECD standard in automatic exchange of information between governments. HMRC will have access to greater levels of information than ever before: offshore banks will start to collect information on UK taxpayers in three months’ time, which will be automatically reported to HMRC.’
Gauke also indicated that ‘HMRC is ready and able to pay rewards for significant information from whistleblowers which helps uncover secret offshore accounts.’
In its document announcing the plans, HMRC said that it will consult on the detail of the offence – which will only apply to offshore income which is taxable and must be reported to HMRC - later in the year.
Andrew Tyrie, chairman of the Commons Treasury committee, said the committee would be taking ‘further evidence on the extension of HMRC’ powers’, saying:
‘we must be vigilant to ensure we don’t lose the essential balance between the powers that HMRC needs and protecting individuals.’
Paul Aplin, chair of the ICAEW Tax Faculty’s technical committee said:
‘As a profession, we are fully behind the government’s and HMRC’s efforts to tackle tax evasion. However, we have considerable concerns.