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HMRC to step up sanctions against offshore tax evasion

HM Revenue and Customs has announced plans to toughen up penalties for offshore tax evasion, and is looking at a new corporate criminal offence for failure to prevent the facilitation of evasion.

HMRC to step up sanctions against offshore tax evasion

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In a consultation paper issued on Thursday, the tax authority said the move was in preparation for the automatic exchange of tax information among the 90 nations signed up to the Common Reporting Standard (CRS), which begins in 2017.

“The days of hiding money offshore are coming to an end,” it said in the consultation paper.

“Evaders are on notice that our existing disclosure facilities will close at the end of 2015 and be replaced by a final, tougher worldwide disclosure facility in advance of the first data exchange under CRS in September 2017.”

HMRC said the Government considers offshore tax evasion particularly deplorable and sees a case for further strengthening the deterrents and penalties for this offence.

“Criminal investigation and sanctions will play an increasingly prominent role in HMRC’s response to offshore tax evasion.”

With the 17 September CRS deadline in mind, HMRC said it wants to hear from individuals with offshore income and assets; tax practitioners; representative bodies; and other interested parties on a series of major questions including whether to increase the minimum penalty for deliberate offshore evasion.

Broad scope

Jason Collins, partner at the international law firm Pinsent Masons, said the proposed new offence for failure to prevent the facilitation of offshore evasion could target a very broad range of organisations.

 “It is not only banks that will be affected by the creation of the new criminal offence, but a long list of accountancy and law firms, trustees and financial advisers.”

“The proposed legislation is also extremely broad geographically, with foreign corporations falling within its scope, as well as UK corporations that facilitate the evasion of taxes overseas, even if there is no loss to HM Treasury in this country,” Collins said.

“This new measure looks likely to produce further red tape for a wide range of businesses who will be forced to put new policies and procedures in place for their employees and undertake careful due diligence on  any third parties to whom they refer customers,” he said.

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