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New criminal offences in clampdown on tax evasion

Shortly before the election the previous UK Coalition Government announced new proposals to tackle tax evasion.

The proposals include: 

  • For offshore evaders, a new strict liability criminal offence under which it will no longer be possible to plead ignorance in an attempt to avoid criminal prosecution for undeclared tax.
  • For those who enable evasion, a new criminal offence for corporates that fail to prevent tax evasion or the facilitation of tax evasion. It is not clear whether this is to be limited to offshore tax evasion, or whether the offence will extend just to corporates or individuals operating within corporates.
  • Increasing the financial penalties faced by evaders (which are currently up to 200% of the tax due), so that they can be linked to the value of the asset kept in an offshore bank account.
  • Introducing new civil penalties on those who enable evasion so that they will face the same penalty as the tax evader.
  • Publicly naming and shaming both evaders and those who enable evasion.

An increase in the amount of information to be received by HMRC under expanding international regimes for the automatic exchange of information, which should make it easier for HMRC to track down evaders in future.

This announcement was made shortly after a media focus on the potential use of offshore bank accounts to evade UK tax. We expect the new majority Conservative Government to pursue the policy.

Any consultation is likely to give rise to a number of responses. For instance, those potentially subject to the "enabling" offence, including banks, fiduciaries and professional services firms, are likely to be grappling with what it means to "fail to prevent tax evasion": just how involved does one of these entities need to be with the tax evader or its activities for this to be relevant? There are also likely to be a number of comments about the new strict liability nature of the criminal offence, which is rare for tax legislation.

The document is available here 

Legal and Regulatory Risk Note
United Kingdom