After two years of consultations, the threatened “crackdown” by HMRC on those who have irregularities in their UK tax affairs in relation to offshore assets is now well on its way. There are a number of provisions, some of which have already been legislated and some of which are still in draft but which take effect for the 2017/18 tax year.
Not all of the new legislation targets individual taxpayers, but there are punitive sanctions for enablers of tax evasion and for bodies corporate (including partnerships and LLPs) that fail to prevent the facilitation of tax evasion. While some of the legislation imposes heavy civil penalties, some of the offences are criminal.
We take a look at the various new provisions and their impact in the table.
Taxpayers
There are two key tenets to HMRC’s drive to ensure taxpayers disclose their offshore assets, and the arising UK tax, fully and accurately. The first, which came into force on 7 October 2017 for the year of assessment commencing6 April 2017 is a strict liability criminal offence.
The offence will apply if a UK taxpayer fails to notify HMRC of their chargeability to tax, files an incorrect return or fails to file a return in relation to offshore income, gains, assets or activities where the tax underpaid exceeds £25,000. The maximum sanction for the offence is six months imprisonment.
Controversially, the strict liability nature of the offence means 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. This change will mean HMRC only has to demonstrate that the income or gains were taxable and undeclared to secure successful prosecutions of offshore tax evaders, adding yet another powerful weapon to HMRC’s armoury.
Claims of carelessness or innocent error will not be an acceptable defence for those found guilty. The only defence is that the taxpayer had a “reasonable excuse”, although what constitutes reasonable excuse is not defined. In addition, the burden of proof that the defence applies is on the taxpayer.
Key Points
The threatened “crackdown” by HMRC on those who have irregularities in their UK tax affairs in relation to offshore assets is now well on its way
HMRC is also targeting advisers and fiduciaries
One of the aims of the legislation is to make it possible to attribute criminal liability to a corporate for the criminal actions of employees
