The suggestion is that the UK taxman is receiving more information as a direct result of the introduction of the Common Reporting Standard (CRS).
Early adopters first began sharing information in September last year. A second wave of nations; including Switzerland, the UAE, Hong Kong and Singapore, will begin reporting in September 2018.
Strict liability criminal offences for those who fail to declare offshore income and the UK corporate criminal offence of failing to prevent the facilitation of tax evasion will also drive up HMRC activity in this area, according to Pinsent Masons partner and head of tax, litigation and regulatory, Jason Collins.
Also due to come into effect is the EU mandatory disclosure regime, under which member states will automatically share any information they receive from tax advisers, in-house counsels and other intermediaries involved in cross-border tax arrangements.
Plenty of political encouragement
“The dramatic increase in serious tax evasion cases identified by HMRC shows that it’s rolling crackdown is far from over,” said Collins.
“HMRC is receiving plenty of political encouragement in this crackdown as it looks to increase prosecutions across the board. Both HMRC’s local offices and its specialist directorates are on the lookout for any transaction out of the ordinary that might lead them to a big-ticket tax evasion case.
“Governments believe that some professionals and banks are still helping clients to be non-compliant, especially by devising ways to avoid reporting. The EU and OECD have set out ‘mandatory disclosure regimes’ to tackle this perceived abuse, meaning professional services firms and banks need to be vigilant that they are not being embroiled in serious non-compliance. Businesses may also end up in court if their employees have helped others to evade tax,” he warned.
Tip of the iceberg
Gordon Andrews, financial planning expert at Old Mutual Wealth, said the spike in serious offence showed CRS is effective.
“We think that this is just the tip of the iceberg as more cases are likely to be uncovered as more countries sign up to CRS,” said Andrews.
“Investors with undisclosed overseas assets cannot afford to stick their heads in the sand. HMRC has provided plenty of opportunity for people to disclose their offshore accounts and to ensure that they are complying with regulations. HMRC is determined to tackle overseas tax evasion, regardless of whether there is any intent to avoid tax.
“Moving overseas assets to non-disclosure jurisdictions just delays the inevitable as the number of countries signing up to CRS continues to rise.
“Investors clearly need to think about their actions. With professional advice, investors can still make their assets efficient from a tax and reporting perspective.”
Serious tax evasion is defined by HMRC as involving potential evasion of more than £50,000 ($66,611, €56,925) or where prosecution is possible.