ADVISERS have wasted little time in raising concerns over proposals to introduce a new criminal offence and civil sanctions in offshore tax evasion cases.
In two consultation documents, HM Revenue & Customs is seeking views on the design of the new criminal offence, appropriate safeguards and also tougher civil sanctions for offshore evaders including those who move their taxable assets between offshore banks in different countries in an attempt to hide their wealth.
Enhanced penalties of up to 200% of the tax for offshore income tax and capital gains tax liabilities have applied since April 2011.
The consultation examines situations in which individuals move assets from one offshore centre that has tightened its tax-information-sharing laws to another that has more lax rules.
The 20-year rule limiting how far back HMRC can examine taxpayer’s affairs could also be suspended.
But advisers are worried the move is “draconian” and brings in a “statutory presumption of guilt”, according to Phil Berwick, head of contentious tax at law firm Irwin Mitchell.
In the past, in order to successfully prosecute a person for tax evasion, HMRC had to demonstrate beyond reasonable doubt that they intended to evade tax. That onus could now be removed.
HMRC is “seeking to re-write the rules on offshore penalties before there has been an opportunity to establish the effectiveness of the current regime, which was only introduced in April 2011,” he said.
For some, that threat is unsettling in of itself, but BDO tax partner Dawn Register warned that the policy’s interaction with other powers such as ‘naming and shaming’ could be potent.
Saffery Champness tax partner Ronnie Ludwig was sceptical of the effect the move will have on tax yield, pointing to the disappointment of the Swiss tax agreement.
“Whether these new measures will actually be effective in getting evaders to pay up is anyone’s guess,” he said. “The results to date of HMRC’s wider efforts to tackle evasion using existing measures have fallen far short of expectations.
“The potential of handcuffs really represents more of a new scare tactic than anything else, as truly hardened evaders the world over are likely to continue to ignore or avoid the UK taxman.”
At HMRC, Dmitri Surendran was responsible for leading the London team of the offshore, corporate and wealthy unit of the fraud investigation service
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