HMRC Consultation on Civil Sanctions for Enablers of Offshore Evasion

HMRC has issued a consultation document which specifically targets enablers of offshore evasion.

HMRC has constituted offshore evasion as:

1. Moving of UK gains, income or assets offshore to conceal them
2. Not declaring taxable income or gains that arise overseas
3. Use of complex offshore structures to hide beneficial ownership of assets, income or gains.

HMRC has also stated that an ‘enabler’ be defined as a person who knowingly or unknowingly provides services which assist a UK taxpayer to evade tax. Furthermore HMRC has stated that the following behaviours are evidence of activities by enablers assisting taxpayers to evade tax which they are seeking to target:

1. Middleman – arranging access and providing instructions to others who may provide services relevant to tax evasion
2. Provide planning or bespoke advice – on structures, jurisdictions or investments which enable taxpayers to hide their wealth
3. Delivery of infrastructure – setting up of companies, trusts or other vehicles to hide beneficial ownership; opening bank accounts, providing legal services which underpin the evasion
4. Maintenance of infrastructure – providing trust or company management services including nominee services
5. Financial assistance – helping the evader to move their money or assets
6. Non-reporting – not fulfilling reporting, regulatory or legal obligations.

HMRC has classified behaviour by enablers as falling in to 1 of 3 categories:

1. Unaware – Genuinely didn’t know that their actions enabled tax evasion
2. Careless – Failed to implement policies which would identify the enabling of tax evasion
3. Deliberate – Wilfully acted dishonestly.

HMRC’s view is that enablers who fall in to the ‘Unaware’ category require assistance not punishment. For those who fall in to ‘Careless’ or ‘Deliberate’ category, HMRC do not believe the deterrents are currently in place to change behaviours and this is the aspect that they have sought consultation upon.

HMRC is consulting on charging penalties to enablers who deliberately assisted a UK taxpayer to evade tax and HMRC has either convicted or levied a penalty on the taxpayer in relation to the same tax evasion matter.

HMRC is proposing that:

1. The standard penalty be 100% of the revenue lost to which the enabler’s actions contributed
2. If HMRC identify multiple enablers HMRC is proposing to levy a penalty against all the enablers independently as opposed to an apportionment of one penalty
3. Penalty reductions will be available for enablers who seek to amend their behaviours/practices. HMRC suggest 30% of the lost revenue as a minimum penalty if enablers come to them to make an unprompted disclosure.
4. Minimum penalty of £1,000
5. HMRC will work with the relevant authority if the enabler is based entirely offshore with no UK presence
6. HMRC will work with relevant authorities who also seek to levy penalties in relation to their own jurisdictions and enablers are based in the UK
7. Naming and shaming of enablers who are charged a penalty.

Edwin Coe will be responding to the Consultation however in the meantime please contact any member of the Tax Services team.

The Consultation Document can be found by clicking here.

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