UK Government Goes After Offshore Tax Evaders

UK Government Goes After Offshore Tax Evaders

The UK Government body responsible for tax collection, HMRC (Her Majesty’s Revenue and Customs) has announced new measures aimed at forcing those who keep their wealth in offshore accounts to declare their taxable offshore income and gains. The single biggest change being proposed is to make it a criminal offence not to declare such taxable income. At present it is a less serious civil offence.

In English Law this is a very significant change. The object of civil law is to make the wrongdoer pay compensation to the offended party. So someone found guilty of offshore tax evasion under the current system will be ordered to pay what they owe and also a fine; which under changes introduced in April 2011 could be up to 200% of the tax they owe.

But under criminal law, as well as paying what they owe and a hefty fine, the offender is also subjected to a punishment. This could be an even larger fine or a prison sentence. And the offender then also carries the stigma of having a criminal record. The idea behind this is that the offender and others who may be committing or tempted to commit the same crime are given a strong inducement not to do so. It also satisfies a public sense that wrongdoing should be punished and that nobody is above the Law.

The present UK Government has been actively conducting negotiations with jurisdictions around the world about offshore accounts. As a result, many more countries have agreed to share information on offshore accounts. The principal target of the proposed new regulations would be those who attempt to move their money from a country which has tightened its tax-information-sharing laws to one which has a more lax system.

Another proposal under consideration is to suspend the current 20-year limit on how far back HMRC can examine a person’s tax affairs.

Explaining the proposals which are being discussed, David Gauke, Financial Secretary to the Treasury, said that investors, “must pay the tax they owe here”. He went on: “Over 56,000 people have already told HMRC about what they owe offshore and HMRC has offered opportunities to clear things up as quickly and easily as possible. Those that don’t come forward must face tough consequences, including a criminal conviction.”

Some tax advisors have expressed concern over the new regulations, saying that they go against one of the main tenets of English Law, that a person is innocent until proven guilty. They say that the proposals seem to presume guilt. HMRC is keen to show that it is willing to listen to all suggestions, as the consultation period will continue until 31 October this year.

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