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Tackling offshore evasion consultations

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HMRC has published the following four consultation documents, with a deadline of 8 October 2015, to tackle offshore tax evasion (see

  • A new corporate criminal offence of failure to prevent the facilitation of evasion: considering a new criminal offence for corporations that fail to take adequate steps to prevent their agents from facilitating tax evasion in relation to all taxes. The consultation is to canvas views on how best to achieve this and the defences required to ensure that corporations are not held criminally liable where they have taken reasonable steps to try to prevent their agents from criminally facilitating tax evasion.
  • Civil sanctions for enablers of offshore evasion: HMRC is consulting on a new penalty regime for those who enable evasion involving income tax, CGT or IHT, based on the amount of tax they have helped taxpayers to evade. The consultation seeks views on the definition of 'enabler' and on options for public naming of enablers.
  • Strengthening civil deterrents for offshore evaders: HMRC is consulting on six main options for changing the calculation of civil penalties for offshore evaders, including a penalty based on the value of the asset on which tax was evaded, a special penalty awarded by the Upper Tribunal, and wider public naming of evaders.
  • A new criminal offence for offshore evaders: HMRC is consulting for a second time on the new criminal offence of failure to declare offshore income and gains. This follow-up consultation proposes that it should apply: initially only to income tax and CGT; subject to a minimum annual threshold to all offshore income and gains and not just under-declared investment returns; with an option for a prison sentence of up to 6 months; and subject to a statutory defence of reasonable excuse for certain parts of the offence.

These consultations take forward HMRC’s strategy for tackling offshore evasion, published in No safe havens. An update on this strategy was published in April 2014. However, the CIOT has criticised the intention of introducing a new ‘strict liability’ offence for offshore tax evasion. Patrick Stevens, CIOT tax policy director, said: ‘Any new measures should be based on sound legal principles. One of these is that in order to make a criminal conviction it should generally be required to show that the act was committed with criminal intent unless there is potential for an immediate threat to public safety. The proposed strict liability offence for failing to declare overseas income and gains fails this test. A taxpayer may fall within the ambit of the offence without any intention or knowledge on their part.   

‘The government’s announcement that there will be a de minimis threshold of £5,000 of under-declared tax before the new offence can apply is welcome. This is something we argued for during consultation. It will at least ensure that those making errors over relatively small amounts of tax will not get caught by this new offence. The announcement that there will be “reasonable excuse” and “reasonable care” defences is also welcome. However, these defences and thresholds do nothing to change the fact that someone who has no intention to evade tax could still be liable to criminal sanctions, and we think this is wrong.’

On the proposals to introduce a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion and new civil penalties for those who facilitate evasion, Stevens added that ‘there is already plenty of law in this area’, particularly around anti-money laundering rules and liability to a criminal offence under the Proceeds of Crime Act 2002.