UK To Introduce Tougher Regime On Tax Evasion
HM Revenue and Customs (HMRC) has launched four consultations on the UK Government’s proposed new approach to tackling offshore tax evasion.
Under the proposals, corporates who are deemed to have failed to prevent tax evasion or the facilitation of tax evasion would face a criminal offence. A separate strict liability offence would apply in the case of individuals who fail to declare taxable offshore income and gains. The financial penalties faced by evaders would be increased, and civil penalties would apply to those found to facilitate evasion. Finally, evaders and those who enable evasion would be publicly named.
The Government previously held a consultation on the proposed strict liability offence. This second consultation takes account of the issues raised and proposes a model that HMRC says provides a proportionate sanction and contains appropriate safeguards. It stipulates that the offence should apply to all offshore income and gains, in respect of income tax and capital gains tax, and that there should be a minimum threshold of under-declared tax, applicable to each tax year separately.
Jason Collins, Partner at international law firm Pinsent Masons, commented: “The proposed legislation allows HMRC to target a very broad range of organizations. It is not only banks that will be affected by the creation of the new criminal offence, but a long list of accountancy and law firms, trustees, and financial advisers, and even support services like company formation providers, who should now be paying very close attention to the risks created by this legislation.” Businesses would be forced to put new policies and procedures in place for their employees, and undertake due diligence on any third parties to whom they refer customers, creating an additional layer of red tape, he explained.
Collins pointed out that foreign corporations would also be impacted by the legislation. He suggested that there would be difficulties prosecuting foreign companies in the UK’s courts, but that firms would nevertheless want to ensure they comply with the rules. However, some banks may consider closing their UK facing operations as a result of the changes. “It may be better for the Government to look at introducing this type of offence in concert with other jurisdictions rather than going it alone,” Collins said.
