NEW POWERS set to be granted to HM Revenue & Customs in order to tackle offshore tax evasion are “seriously flawed”, according to law firm Kingsley Napley.
In its official response to the consultation on plans to introduce a strict liability offence for individuals who evade tax, the firm said the proposals were “unclear, unworkable and ultimately unjust”.
Tax evasion by definition requires a deliberate act to deprive the HMRC of monies to which it is entitled, the firm argues.
“The problem with what is proposed is that someone could be found guilty of committing tax fraud following a genuine mistake,” partner David Sleight said.
The firm added HMRC is aware of the “inherent unfairness of a strict liability offence”, and has proposed a number of defences including “reasonable excuse” and “reasonable care” for not providing accurate information regarding offshore income or assets. These, however, are currently ill-defined.
Sleight said: “No examples have been given of the kind of behaviour which would be caught by the proposals that are not already covered by offences under current tax evasion provisions. The proposed legislation is complex, confusing and is likely to create more litigation than it resolves. The lack of clarity rather defeats the purpose of the proposed legislation which was apparently designed to be simpler to administer.”
An HMRC spokesman said: “The new offence, which would only apply to undeclared offshore income and gains above £5,000 per year, would not be applied to anyone who had taken reasonable steps to ensure they paid the right amount of UK tax.”
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