As reported earlier this week, the Treasury has published plans to make it easier to bring a criminal prosecution against those with undeclared offshore assets, even if there is no proof the individual tried to evade tax.
The publication of No Safe Havens 2014, as the consultation document is called, was accompanied by a widely reported statement from Chancellor George Osborne who was in Washington attending the International Monetary Fund’s spring conference.
Osborne said the proposals will “change the balance of the law so the burden of proof falls on those who are hiding their money offshore, and we don't have to prove they intended to do so”.
However, Mike Down, a former HM Revenue & Customs tax inspector and the head of tax and investigations management group at Baker Tilly, asks whether, given HMRC already has the means to criminally investigate and prosecute tax fraudsters, “it is not a step too far in a just society to automatically criminalise those holding offshore assets without questioning whether an intent to avoid tax is present?”
Down says, given the complexity of the UK tax regime, “simple and often innocent issues can arise which result in additional tax liabilities”.
He gives the example of a taxpayer who was born and who has lived abroad all of his life who comes to reside in the UK for the first time and continues to maintain a bank account in their home country. Down asks whether the Treasury's planned strict liability would apply in this circumstance?
There is also a question over whether HMRC has the capacity to cope with a significant increase in cases.
“How will HMRC cope with such a fast growing number of criminal investigations,” added Down.
“Already the number of such investigations resulting in the taxpayer being charged has risen from just 165 in 2010/11 to an anticipated 1,174 in 2014/15, so will HMRC have adequate resource once the proposed new criminal sanctions become law?”
In addition to the No Safe Havens 2014 announcement, HMRC also produced a consultation which closed in February setting out plans to bundle together similar tax cases awaiting trial and, in the event it wins a case, ask all those in a similar position to pay the contested tax, before their day in court.
HMRC’s plans have drawn fire from a number of corners of the tax industry, with many lawyers arguing HMRC’s actins “smack of desperation”. Click here to read more.
