HMRC needs a change in approach rather than more powers if it is to improve its efforts to tackle tax evasion, according to tax professionals, following the release of HMRC’s updated strategy document No Safe Havens 2014.
HMRC updated the original document, which was published in March last year, to outline a new strategy to clamp down on those who conceal income and assets in overseas jurisdictions in order to evade paying tax. Changes include proposals for extended penalties and a new strict criminal liability for undeclared offshore income, under which HMRC would no longer have to prove that an individual intended to evade tax. The document also highlights the growing network of FATCA-style agreements to improve international tax compliance.
Phil Berwick, a partner and tax investigations specialist at law firm Irwin Mitchell, said: ‘In our view, HMRC already have sufficient powers to tackle offshore evasion. What needs to change is the perception by tax evaders of the risk of being caught. That requires tougher action from HMRC, not changing the rules to make it easier for them to reach their prosecution target.
‘The document No Safe Havens 2014 refers to 56,000 people coming forward through HMRC’s disclosure facilities. Approximately 45,000 taxpayers used the offshore disclosure facility in 2007, meaning that only 11,000 taxpayers have used HMRC’s disclosure facilities since that year. It’s time for HMRC to use more recent, and meaningful, statistics. At present, HMRC regularly uses “nudge” letters in order to encourage taxpayers with undeclared liabilities to come forward.
‘HMRC needs to change its approach. Changing the definition of criminal behaviour is not the way to do it. When taxpayers realise they stand a realistic chance of being caught by HMRC, they will change their behaviour. HMRC is happy to bang the drum that they are “closing in” on taxpayers with undeclared offshore income, and already have the powers and sanctions to pursue tax evaders.
‘A key issue is whether HMRC have sufficient resources to do so, or whether they are happy to continue to ‘nudge’ taxpayers into responding, and then, at some stage in the future, attacking the hardcore evaders who will continue to transfer their funds to non-compliant jurisdictions.’
Jim Wilson, head of tax controversy at EY, commented: ‘While it is important that HMRC continues the successful work it has been doing in recent years, on clamping down the use of offshore bank accounts to evade UK taxes, the new proposals raise a number of potential concerns. To enable someone to be convicted of a tax offence, HMRC would normally have to be able to demonstrate beyond reasonable doubt that the person concerned knew they were committing an offence. The proposals remove this requirement.
‘When further details are published later this year, they will need to be carefully scrutinised to ensure that appropriate safeguards are in place to prevent any misuse of these new powers.’
HMRC needs a change in approach rather than more powers if it is to improve its efforts to tackle tax evasion, according to tax professionals, following the release of HMRC’s updated strategy document No Safe Havens 2014.
HMRC updated the original document, which was published in March last year, to outline a new strategy to clamp down on those who conceal income and assets in overseas jurisdictions in order to evade paying tax. Changes include proposals for extended penalties and a new strict criminal liability for undeclared offshore income, under which HMRC would no longer have to prove that an individual intended to evade tax. The document also highlights the growing network of FATCA-style agreements to improve international tax compliance.
Phil Berwick, a partner and tax investigations specialist at law firm Irwin Mitchell, said: ‘In our view, HMRC already have sufficient powers to tackle offshore evasion. What needs to change is the perception by tax evaders of the risk of being caught. That requires tougher action from HMRC, not changing the rules to make it easier for them to reach their prosecution target.
‘The document No Safe Havens 2014 refers to 56,000 people coming forward through HMRC’s disclosure facilities. Approximately 45,000 taxpayers used the offshore disclosure facility in 2007, meaning that only 11,000 taxpayers have used HMRC’s disclosure facilities since that year. It’s time for HMRC to use more recent, and meaningful, statistics. At present, HMRC regularly uses “nudge” letters in order to encourage taxpayers with undeclared liabilities to come forward.
‘HMRC needs to change its approach. Changing the definition of criminal behaviour is not the way to do it. When taxpayers realise they stand a realistic chance of being caught by HMRC, they will change their behaviour. HMRC is happy to bang the drum that they are “closing in” on taxpayers with undeclared offshore income, and already have the powers and sanctions to pursue tax evaders.
‘A key issue is whether HMRC have sufficient resources to do so, or whether they are happy to continue to ‘nudge’ taxpayers into responding, and then, at some stage in the future, attacking the hardcore evaders who will continue to transfer their funds to non-compliant jurisdictions.’
Jim Wilson, head of tax controversy at EY, commented: ‘While it is important that HMRC continues the successful work it has been doing in recent years, on clamping down the use of offshore bank accounts to evade UK taxes, the new proposals raise a number of potential concerns. To enable someone to be convicted of a tax offence, HMRC would normally have to be able to demonstrate beyond reasonable doubt that the person concerned knew they were committing an offence. The proposals remove this requirement.
‘When further details are published later this year, they will need to be carefully scrutinised to ensure that appropriate safeguards are in place to prevent any misuse of these new powers.’
