UK Gov’t issues New Year’s reminder of ‘tough new sanctions’ aimed at tax evasion enablers

Accountants, bankers, lawyers and other professionals who help individuals with UK tax obligations to avoid them “will face tough new sanctions” as of Sunday, the Government reminded industry practitioners,  just hours into the New Year.

On Sunday, which was the first day of 2017, at 9:30am, UK financial journalists received a press release notifying of them of a  just-posted “news story” on the Government’s website,  issued jointly by the Treasury and Financial Secretary to the Treasury, Jane Ellison. The posting detailed a “raft of [new] measures” coming into force on 1 January that Ellison said, in a statement contained in the posting, “will create a level playing field for the vast majority of people and businesses who play fair and pay what is due”.

“This year will also see the government introduce a new corporate criminal offence of failing to prevent the facilitation of tax evasion,” she added.

“Under the new rule, currently being legislated for, companies will be held liable if an individual acting on its behalf as an employee or contractor facilitates tax evasion. Previously there needed to be proof that the board of directors were aware and involved in facilitating the evasion.

“This is alongside introducing a new requirement to correct past tax evasion, which will see anyone who has failed to correct past evaded taxes by 30 September 2018 hit with tough new penalties, and consulting on a new requirement for businesses and individuals who create complex offshore financial arrangements that bear the hallmarks of enabling tax evasion to notify them to HMRC.”

According to the Treasury, HMRC has secured more than £130bn in additional compliance revenues since 2010 as a result of government actions to tackle tax evasion, tax avoidance, and non-compliance. It says the tax authority has also secured more than £2.5bn “specifically from offshore tax evaders”.

As reported,  UK prime minister Theresa May has called for a crackdown on individuals and companies’ use of offshore tax havens, as part of her drive to “reform capitalism” after the so-called BHS scandal, which saw Britain’s BHS retail chain forced to shut its doors, with the loss of  some 11,000 jobs and a £570m pension scheme deficit.

The tougher penalties taking effect this year also come in the wake of numerous highly-publicised cases involving wealthy celebrities who have taken advantage of tax avoidance schemes that later were ruled to be tax evasion enterprises.

In November, for example, The Times reported that almost 800 investors, including many wealthy and famous individuals, were facing tax charges of as much as 20 times what they invested in schemes that HMRC had determined were designed specifically to avoid tax. The investors were said to include former Manchester United football club manager Sir Alex Ferguson, former England managers Sven-Göran Eriksson and Glen Hoddle, and former Sainsbury’s chairman Sir Peter Davis.

.In October, England and Manchester United captain Wayne Rooney was reported to be looking at a £3.5m (US$4.3m) tax bill after HMC said that it was challenging a suspected tax avoidance scheme in which he was an investor.

Some industry critics have warned that the distinction between tax avoidance, which is legal, and tax evasion, which isn’t, is becoming blurred, with HMRC being given the role of both judge and jury, and always after schemes have been set up, and investors brought in. Some have called for all avoidance schemes to be vetted in advance by HMRC, in order to spare investors from the risk of having to pay punishing penalties down the road, should their avoidance scheme subsequently be found to constitute an evasion scheme instead.

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