Companies that facilitate tax evasion are set to face criminal charges under plans unveiled ahead of an “unprecedented step change” in HM Revenue & Customs’ ability to prise open secret offshore accounts.
David Gauke, Treasury minister, announced proposals for a range of new sanctions on Thursday — including plans to criminalise owners of secret offshore accounts — aimed at leaving “nowhere left to hide” for tax evaders.
“People who evade tax, facilitate or turn a blind eye to tax evasion will now face powerful criminal and civil sanctions under our tough new regime,” he said.
Advisers said the proposals were far-reaching, affecting a wide range of organisations in the UK and abroad. Jason Collins, partner at Pinsent Masons, a law firm, said the legislation would create risks for accountancy, law firms, trustees, financial advisers and even support services such as company formation providers.
He said the new legislation would affect foreign as well as UK companies that played a role in overseas tax evasion. He said: “There would be difficulties prosecuting foreign companies through the UK’s courts, but many will want to make sure they comply with these rules for fear of damage to reputation.”
The new criminal offence is intended to apply to companies that fail to prevent their agents from facilitating offshore tax evasion — unless they “take reasonable steps” to prevent such activities.
The measures were originally announced in March as ministers sought to crack down on abuses in the wake of a political storm over a tax evasion scandal at HSBC’s Swiss banking operation.
The proposal to create a “strict liability” offence of offshore tax evasion — meaning an individual can be prosecuted regardless of whether there was evidence of an intention to break the law — was first put forward last year. But it was heavily criticised by the Law Society, which said it was likely to breach the principle of the right to a fair trial.
Although many tax professionals expected the government to drop the measure, it has been pushed forward in the wake of the HSBC Swiss banking row.
In an earlier consultation paper last year the Treasury said it did not expect to apply the “strict liability” measure in cases where the account was held in countries that were automatically exchanging information. But the “continued toughening of its approach” and the rapid expansion in the number of countries that have agreed to exchange information — now totalling 94 — has prompted HMRC to apply the new measure everywhere.
In Thursday’s consultation paper, it said it wanted to criminalise the facilitation of tax evasion ahead of receiving tax information under automatic exchange agreements in 2016. It said it wanted to prevent advisers from creating structures that would circumvent the new transparency rules.
The proposals published on Thursday will criminalise owners of secret offshore accounts involving more than £5,000 of undeclared tax — unless they had a reasonable excuse or could show they had taken reasonable care.
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