Tax avoidance crackdown
The new regulation, originally announced in a consultation paper in August, comes after the British prime minister Theresa May promised a tougher crackdown on tax avoidance and evasion following the ‘Panama Papers’ leak in April.
In the same month, the tax authority also revealed it will increase penalties on anyone who has not paid outstanding taxes from offshore investments ahead of the start of a new data sharing agreement with the crown dependencies and territories, which went live in October.
Under the current system, people found guilty of using tax avoidance schemes face penalties from HMRC while their advisers face very little risk.
“There is a whole supply chain of advice and intermediation between those who develop tax avoidance arrangements or schemes and those who ultimately use them in an attempt to pay less tax than parliament intended.
“The people who introduced users to the avoidance, or facilitated its implementation, bear limited risk or downside when avoidance arrangements are defeated by HMRC.
“The government wants to deter enablers of tax avoidance and considers that financial sanctions would provide a tangible response by minimising the financial rewards those enablers would otherwise enjoy,” said the HMRC in a summary of the consultation.
Tax avoidance vs evasion
Phil Knop, group director of Boston Multi Family Office, an Isle of Man-based tax advisory firm with offices in Malta and Dubai, said the HMRC proposals send a clear message to individuals and firms that continue to use tax avoidance schemes.
“Notwithstanding that the distinction between tax avoidance and evasion still needs to be made, the proposals for enablers of tax avoidance are clearly far-reaching and are yet another part of HMRCs wider strategy following quickly on the heels of legislation to tackle enablers of tax evasion.
“The scope of the proposals, severe financial penalties and the potential naming and shaming of those in the supply chain is a strong deterrent.
“For individuals and firms who continue to utilise such arrangements, the financial and reputational risks cannot be understated and so it will be interesting to see what appetite continues to exist in this particular market should HMRC move forward with its proposals,” he told International Adviser.
