HMRC takes aim at tax dodgers hiding foreign income
Credit: The Telegraph
The taxman plans to crack down on people who hide earnings from offshore investments, with greater powers to impose tougher penalties.
People who do not reveal income from foreign accounts and investments to HM Revenue & Customs (HMRC) could be hit with penalties of three times the amount of tax they have dodged under the proposals, up from the current level of twice the amount owed.
Tax dodgers are also more likely to be identified with Crown Dependencies and Overseas Territories, some of which are seen as good places to salt away wealth. From October these territories will begin to share data with the UK, a move seen as “game-changing” by the taxman.
HMRC is also taking a more aggressive stance on launching criminal prosecutions against those who conceal income from foreign assets under the new criminal offence of tax evasion.
Jane Ellison, Financial Secretary to the Treasury, said: “Every penny of tax that people evade deprives our public services of essential funding and we are focused on collecting all tax that is due.
“From October we will start to receive data on the offshore finances of UK taxpayers. This is a game-changer in the fight against evasion and it’s time for anyone who is evading tax to do the right thing and pay what they owe.”
Next year HMRC will have even more data to hunt down evaders as a worldwide common reporting standard comes into force.
Jennie Granger, director-general of enforcement and compliance for HMRC, added: “We are determinedly tackling this. We will find those who think they can dodge paying tax in this country. We’ve closed old disclosure facilities, increased penalties, and ramped up our powers to tackle evaders and those that help others evade – the days of any safe havens for tax evaders are numbered.”
Even with those who do come clean about what they owe, HMRC is taking a harder line. From September 5 a “Worldwide Disclosure Facility” will allow those who have not paid due tax to put their affairs in order – but it will not offer any special terms such as a reduced bill as a reward for admitting their tax laxity.
The scale of tax avoidance in the UK is huge. According to HMRC’s own figures, its collectors brought in Â£26.6bn by tackling tax evasion and avoidance in 2014-15. Since 2010, Â£2.5bn has raised from moves to tackle offshore tax dodgers.
However, HMRC’s pursuit of tax dodgers has proved controversial in the past. In 2012 the tax collector was cleared of agreeing “sweetheart” deals with big business over unpaid tax bills, but told to clean up its act by the National Audit Office (NAO).
The watchdog investigated five settlements with companies including Vodafone and Goldman Sachs over negotiated settlements where HMRC accepted less than the full amount due, while pursuing smaller companies and individuals without the resources to fight for a deal.
In February the issue blew up again when the Public Accounts Committee criticised what it called HMRC’s “disproportionately small” Â£130m settlement with Google over 10 years of taxes.
The internet search company has always insisted it pays a “fair” amount of tax and then-Chancellor George Osborne called the arrangement with Google a “victory” .
However, the tough new stance came with a warning from Craig Hughes, tax director at accountancy firm Menzies.
“While the drive to tackle offshore tax evasion is understandable, it is important to remember that the vast majority of people who structure their affairs offshore do so for many legitimate reasons,” he said. “Care must be taken not to tar legitimate taxpayers with the same brush as those who are corrupt and seek to launder or hide illicit funds through offshore accounts.”
He called the “three times” penalty a “particularly tough sanction” that would drive people with offshore assets to check they meet the rules.