Treasury proposal may fine tax evaders up to 200% of amount owed
Tougher stance follows Theresa May’s leadership campaign promise to be more punitive of tax evasion and avoidance
The Treasury is proposing new rules to punish offshore tax evaders who fail to come clean about their finances before September 2018, with fines of up to 200% of the amount owed.
The prime minister, Theresa May, promised to be tough on tax evasion and avoidance last month during her campaign to become leader of the Conservatives. The Treasury has acted swiftly to signal a tougher stance with greater powers for tax inspectors.
The “requirement to correct” measure will apply to individuals and corporations. Those owing UK tax will be penalised and potentially named and shamed if they fail to declare all the relevant information to HM Revenue & Customs.
Jane Ellison, financial secretary to the Treasury, said: “For too long it has been too easy for people to hide their money overseas to evade tax. We are changing that.”
The penalties range between 100% and 200% of the undeclared tax, and those caught may also have to forfeit a percentage of their assets. The rates are higher than existing fines, which can be reduced to zero for those who come forward and have been careless rather than deliberately dishonest.
Ellison said the Treasury will be able to come down harder on evasion because tax inspectors will soon have greater access to information on assets held offshore. This will begin next year with the introduction of the “common reporting standard”, an agreement between 100 countries to automatically share information about bank accounts belonging to individuals, companies, trusts and foundations.
The UK is among a group of 54 early adopters who will start sharing this information by 2017, as are some of the better-known tax and secrecy havens, including the British Virgin Islands, Cayman Islands, Luxembourg, Liechtenstein, the Isle of Man, Jersey and Guernsey.
Switzerland, the Bahamas and Singapore will be involved by 2018, along with Panama. The Central American country had previously refused to join the initiative but international condemnation after the publication of the Panama Papers led to an about turn.
The US, where bank regulation is divided between federal and state agencies, has still not signed up to the initiative.
Last week the Treasury published a consultation on new laws to punish the facilitators of tax avoidance. It targets the accountants, lawyers, financial advisers and banks who market schemes that fall foul of the tax tribunals.
The measure will seek to discourage enablers of schemes such as the £290m structure in which the radio presenter Chris Moyles and hundreds of others tried to save tax by claiming losses incurred as secondhand car dealers.
This week’s measure – first announced by the then chancellor, George Osborne, in the 2015 autumn statement – is likely to be introduced as part of the 2017 finance bill.
Under “requirement to correct” HMRC will be able to fine tax avoiders for incorrect statements going back between four and 20 years, depending on whether the avoidance was deliberate or not.