United Kingdom: The UK Introduces New Criminal Offence For Tax Evaders

The UK Chancellor, George Osborne, announced new sanctions against offshore tax evasion, last month.

The UK government intends to introduce a new “strict liability” criminal offence for not declaring untaxed offshore assets. Under the plans announced by the Chancellor, HM Revenue & Customs (HMRC) would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for a criminal conviction to be handed down. At present, HMRC has to demonstrate that even when someone failed to declare offshore income the individual intended to evade tax. This change will mean HMRC will only have to prove the income was taxable and undeclared making it easier to secure successful prosecutions of offshore tax evaders.

The government will consult on a range of options building on the existing penalties for those hiding their money in offshore accounts. The consultation will look at whether the existing penalty limit should be raised further, how penalties could be increased if individuals try to move money around and including inheritance tax among the penalties.

The Chancellor’s announcement raised concerns that these are very tough new liabilities, which require strong safeguards to protect innocent tax payers from the risk of mistakes or misuse by HMRC.

Following this announcement on April 14th, HMRC published a publication “No Safe Havens 2014” as part of its offshore evasion strategy providing details on the progress made in tackling offshore tax evasion, the new actions being taken, and how HMRC intends to exploit data sources better and influence behaviour.

Indicatively, among the suggested actions are the following:

Introducing legislation to implement the new OECD standard in automatic exchange of information between governments;

Consulting on strengthening the existing civil sanctions, including penalties for offshore tax evasion;

Consulting on the detail of a new strict liability criminal offence for failing to declare untaxed offshore assets;

Paying rewards to those who provide significant information to HMRC that helps tackle offshore tax evasion.

The Chancellor stated, “The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5 billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing. But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.”