Latest HMRC consultation would see tax evasion penalties increased

UK tax evaders who fail to “come forward and pay outstanding taxes from offshore investments and accounts” may face even tougher penalties, “of up to three times the tax they try to evade”, as well as an increased risk of facing criminal charges, HM Revenue & Customs said today, as it unveiled yet another consultation. 

In announcing this latest consultation, which will increase the penalties for evading UK tax, HMRC called attention to a new “tax amnesty” type programme it’s due to launch on 5 September, which it’s calling its Worldwide Disclosure Facility, or WDF. First mentioned in the 2015 Autumn Statement, this disclosure facility will allow those with outstanding tax to pay “to put their affairs in order” but will offer no special terms, HMRC said on Wednesday.

It said it will reveal further details about the scheme on the day it comes into force.

The consultation unveiled today, “Tackling offshore tax evasion: a requirement to correct”, is the latest in a long line of actions by HMRC over the last few years which are aimed at harnessing the greater information disclosure taking place between countries and financial institutions in a bid to track down tax evaders and boost the government’s depleted coffers.

As HMRC noted in its remarks for journalists, from October 2016 onward this year it will be “even better able to target evaders”, as that’s when it’s due to begin receiving what it calls “an unprecedented amount of data on those with offshore accounts in the [UK] Crown Dependencies and Overseas Territories(CDOT)”, under an automatic information disclosure scheme sometimes known as the “UK FATCA” or “CDOT” disclosure. This scheme will begin to be subsumed over the subsequent year as the OECD’s Common Reporting Standard begins to take effect across the globe.

“Our message is simple – come to us pay the tax and penalties that are due, before we target you with the introduction of even tougher sanctions and game-changing data,” HMRC’s director general of enforcement and compliance, Jennie Granger, said in a statement.

“We are determinedly tackling this,” Granger added. “We will find those who think they can dodge paying tax in this country. We’ve closed old disclosure facilities, increased penalties, and ramped up our powers to tackle evaders and those that help others evade – the days of any safe havens for tax evaders are numbered.”

The consultation closes on 19 October.

Evasion now ‘virtually impossible’

Reacting to the news, UK tax specialists said that tax evaders now have fewer places than ever to hide, if any, at this point.

“This consultation represents the next step in HMRC’s campaign to shut down any opportunities for offshore tax evasion, and looks ahead to when information sharing under the Common Reporting Standards will make offshore evasion virtually impossible,” said Tessa Lorimer, special counsel for Withers.

“Following the termination of offshore disclosure facilities last year, this is the final chance for taxpayers to come forward to correct their outstanding tax liabilities before September 2018, after which [they] will be subject to a new, tougher set of sanctions.

“Although the penalties proposed are harsh from a historic perspective, taxpayers should not expect to get a better deal in future.”

In 2014/2015, HMRC said, its crackdown on tax evaders and avoiders brought an extra £26.6bn into the government’s coffers. Since 2010, its various offshore evasion “initiatives” have raised more than £2.5bn, HMRC added.

To view and download the latest consultation, click here. 

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