Budget crack down on tax evasion
More criminal prosecutions
The ‘criminalisation’ of tax continues with the budget announcement that funding to HMRC will be increased by a total of over £60m by 2020–21. The additional amounts have been allocated to HMRC to step up criminal investigations into ‘serious and complex tax crime,’ particularly focusing on wealthy individuals and corporates. The idea is to raise £600m by the end of this Parliament.
Pressure on financial intermediaries
Earlier this year, the European Union issued a revised Directive on Administrative Cooperation (DAC). The DAC incorporates the Global Standard on Automatic Exchange of Information to improve International Tax Compliance, known as the Common Reporting Standard (CRS), into EU law. 51 jurisdictions, including the UK, have signed a multilateral competent authority agreement which set out a commitment for those countries to work towards the first exchange of CRS data in either 2017 or 2018. Exchanges will take place with all member states, with the exception of Austria, in 2017. Exchange with Austria will commence in 2018 unless Austria is able to bring forward first exchange to 2017. Current arrangements with non-European jurisdictions such as Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Montserrat and Turks and Caicos Islands are expected to continue under the CRS.
Against this background, HMRC will be given the power to require financial intermediaries and professionals, including tax advisers, to make their clients aware of:
(a) the information HMRC will receive on offshore accounts in 2017 under international agreements to improve tax compliance;
(b) the law relating to offshore tax evasion including the existing offshore penalty regime and the new simple criminal offence for failing to declare offshore income and gains; and
(c) the opportunities that HMRC will make available to individuals to disclose their tax affairs. This will include a time-limited disclosure facility in early 2016 to allow non-compliant taxpayers to get their house in order before HMRC start to receive information from other tax authorities.
This power will have effect from the date the Summer Finance Bill 2015 receives Royal Assent. The details will be set out in regulations to have effect from early 2016, allowing HMRC time to informally consult with financial institutions and tax advisers.
Serial avoiders
HMRC has announced a consultation in respect of ‘serial avoiders’ who persistently enter into tax avoidance schemes which are unsuccessful before the courts. These include a special reporting requirement and a surcharge on those taxpayers whose latest tax return is inaccurate as a result of a further ‘defeated avoidance scheme,’ restricting access to reliefs for such taxpayers and developing further measures to name ‘serial avoiders.’ The scope of the Promoters of Tax Avoidance Schemes regime will also be widened by bringing in promoters whose schemes are regularly defeated.
Levy and Levy comment
The continuing preoccupation with marketed tax avoidance schemes and those who promote them comes as little surprise although such schemes have, frankly, largely disappeared and the legislation seems disproportionate and oppressive – particularly the suggestions that ‘serial avoiders’ should be named and shamed. Surely, enough is enough? HMRC are already equipped to deal with marketed avoidance and have done so very successfully.
The switch into criminal prosecutions is again not surprising and is a continuing part of the ‘criminalisation’ of tax. It is of the utmost importance that any taxpayer faced with criminal investigation by HMRC obtains expert advice at the earliest opportunity. Sentences for tax evasion are increasing in length and criminal tax defence work is a specialist area.
Levy and Levy – the tax investigations and resolution specialists in London and Tunbridge Wells.