The issue of tax evasion and tax avoidance have been attracting a huge amount of international attention recently.
Celebrities being caught out using artificial tax avoidance schemes and high-profile parliamentary inquiries into the conduct of large multinationals like Apple and Google have added fuel to the fire. There seems to be a growing public perception that somehow those who seek to avoid tax are harming other aspects of society.
It is perhaps not surprising that, in line with the international move to clamp down on tax-cheats, HMRC has therefore announced a consultation on a new strict liability offence for tax evasion announced in April. The law is aimed at individuals that fail to declare assets held offshore rather than corporations.
Prior to introducing the new offence, HMRC is inviting submissions from lawyers, tax-specialists and even those who may be affected by it to submit their views on the detailed provisions.
New Tax Offence Proposals
The new measures are aimed at those who attempt to move their assets from country to country in order to hide their wealth. A custodial sentence has not been ruled out for serious offenders.
The criminal offence would only apply where the UK loses out on a significant amount of tax revenue and it would therefore not apply to all tax evaders. Also, it appears that the offence will be limited to income tax and capital gains tax.
Whereas currently, HMRC has to prove intention, the new offence would allow for a conviction simply where the taxpayer failed to declare accurate income or gains.
Many experts are against this measure, due to the problem of a strict liability offence catching out individuals who simply cannot understand tax law.
In order to mitigate against the strict liability nature of the offence, HMRC is considering introducing a number of defences which would be available to the accused. For example there has been talk of an ‘appropriate professional advice’ defence, whereby an evader could be excused if he could show that professional advice has been sought and followed.
Potential Civil Sanctions
In addition to the new criminal offence, HMRC is also considering strengthening existing civil sanctions.
Particular focus will be on those who move their assets into a country which does not have strict information sharing laws. The size of the financial penalty could be linked to the transparency of the particular countries reporting regulations.
Another rule which could potentially be abolished is that which currently prevents the HMRC from examining a taxpayer’s affairs which happened over twenty years ago.
The consultation process will run until October 31st.