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HMRC consultation on new criminal offence for offshore income

17 April 2014

 

We are certain it has not escaped your notice that over recent years, HMRC has decided to undertake a number of initiatives to collect hidden tax from income secreted in offshore banks or complex offshore tax structures. It all began with the Offshore Disclosure Facility (ODF) which ran between April and November 2007 and collected £509m. The second initiative was the New Disclosure Opportunity (NDO) which ran between September 2009 to March 2010 and only collected £123m. Currently, HMRC are running the Liechtenstein Disclosure Facility (LDF) which commenced from September 2009 and ends on 5 April 2016 and so far has raised £730m against a budget of £3 billion.

Additionally (although not a disclosure facility) the UK government entered into a cooperation agreement with Switzerland last year, which only raised £1.9 billion against a budget of £5.3 billion.

As a consequence of the diminishing returns from its attack in this area, HMRC have recently updated their strategy document (“No Safe Havens 2014”) for tackling offshore tax evasion and at page 11 of the document, it raises a very controversial point. If implemented, it would mean that HMRC would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for a criminal conviction to be handed down. This change will mean HMRC only has to demonstrate the income was taxable and undeclared, meaning it will be easier to secure successful prosecutions of offshore tax evaders. This crucial point along with others relating to increasing the offshore penalty provisions will be consulted on at some point during the course of this year.

Due to the favourable terms, including securing immunity from prosecution for the tax offence, individuals who have still not come forward to HMRC should give serious consideration to making a disclosure under the existing LDF.

If you would like to see how the LDF can help you, please contact Doug Sinclair, Head of Tax Investigations.