UK Tax advisers ask for more clarity about new tax evasion criminal offenses

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UK Tax advisers have questioned the need for more clarity about the new tax evasion offenses, following the Government’s announcement that it will go ahead with them.

Documents published alongside the recent Autumn Statement confirm that the Government will introduce:

  • A new criminal offense that removes the need to prove intent for the most serious cases of failing to declare offshore income and gains (a “strict liability” offense);

  • A new corporate criminal offense of failure to prevent the facilitation of evasion; and

  • Tougher civil penalties for offshore tax evasion.

Jon Preshaw, Chairman of the CIOT’s Management of Taxes Sub-Committee, commented on the “strict liability” offense : “This new offense risks criminalizing careless mistakes. The CIOT strongly supports HMRC’s efforts to tackle tax evasion and we agree that the Government should be putting resources into combating and investigating it. However HMRC already have wide criminal investigatory powers at their disposal. This new ‘strict liability’ offense, which will require no proof that the taxpayer deliberately intended to evade tax, is neither necessary nor reasonable.”

“It cannot be right that an individual who simply makes a mistake in their tax affairs, without any intention to act wrongly, should be charged with, and possibly convicted of a criminal offense; think of an elderly person who does not realize that funds are taxable in the UK because they have already been taxed in an overseas jurisdiction; or someone who inherits an offshore account without any direct knowledge of it. Taxpayers in these situations should not face criminal charges.”

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HMRC have said this will be only used in the most serious cases. To achieve this we would argue that the proposed statutory minimum threshold of tax evaded of GBP5,000 is not high enough – a threshold of GBP25,000 would be a more appropriate level.

Commenting on the proposed corporate criminal offense of failure to prevent the facilitation of evasion, Jon Preshaw said: “We remain skeptical that this new offense is needed. Of course anyone who helps a person deliberately evade tax deserves punishment, but there is already plenty of law in this area. If a bank employee, for example, has knowledge of or suspects (or has reasonable grounds for knowing or suspecting) money laundering, which can include tax evasion, they can already be liable to a criminal offense under the Proceeds of Crime Act 2002. Additionally, they commit an offense if they are involved in any arrangements which they know or suspect facilitate money laundering by another person.”

“Practically this is going to be a challenging offense to draft. It is very difficult to hold companies to account for actions of individuals. Clear guidance will need to be provided to help give certainty over how the proposals will work and what organisations must do to ensure compliance.”

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