The release of the 2014 Autumn Statement has confirmed that HMRC has taken a step back from the initially discussed extreme measures to introduce a ‘strict liability offence’ of failing to declare taxable income and gains arising offshore.
The severe plans were first outlined in HMRC’s April 2014 publication ‘No Safe Havens – HMRC Offshore Evasion Strategy’ and further details provided in an August 2014 consultation document.
HMRC outlined in the publication that it wanted to introduce a new strict liability criminal offence for those who did not declare offshore capital gains and income. A strict liability offence is one in which a court does not need to prove the state of mind of a defendant before convicting them, meaning that just the act itself warrants the imposition of a criminal sanction regardless of why the individual broke the rules. This could mean that people who have no idea they have committed a criminal act, take for instance a wife whose husband holds a joint account in an offshore entity and has not disclosed their income and gains from this account, could be found guilty of a criminal offence.
When ‘No Safe Havens’ and the further consultation document outlining the new rules were released, there was much outcry from the public as well as experienced tax professionals as the concept was viewed as largely harsh and unfair. HMRC has evidently had a change of heart and thus after the Autumn Statement was released on 3 December 2014, it appears that the suggested amendments have been dropped.
However, the Autumn Statement 2014 has confirmed that HMRC is extending civil sanctions for not declaring offshore income and gains to inheritance tax. Additionally, when the Finance Bill 2015 receives its Royal Assent, HMRC intends to introduce a new penalty if funds are moved offshore, where up to 50% of the unpaid tax due may be charged in addition to the original civil penalties.
It should be said that although the plans for introducing a criminal offence have been dropped, there is still no safe haven for those who have been keeping funds offshore. If any of the above affects you, Edwin Coe would urge you to make use of HMRC’s offshore disclosure facilities before they end in 2016, and harsher penalties are introduced.
Edwin Coe has significant experience assisting taxpayers seeking to disclose historic tax liabilities to HMRC and managing complex tax investigations. Those considering entering into the settlement opportunity, should seek professional advice before doing so in order to understand what their exposure will be, and to assist with any potential HMRC negotiations regarding penalties.
Please see details on draft Finance Bill 2015 released on the 10 October 2014 here>>
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