HMRC has released online guidance setting out UK taxpayers’ responsibilities in relation to offshore income, assets and activities.
The guidance comes just before the Revenue issues returns for the 2017/2018 tax year, the first year where three new criminal offences apply for tax evasion that has an offshore element.
Paul Noble, tax investigations expert at Pinsent Masons, said the guidance follows the “requirement to correct” provision that applies to individuals and trustees, “with draconian penalties available to HMRC in cases of non-compliance”.
Noble said taxpayers are required to notify HMRC about their offshore income and gains either as part of their self-assessment tax return or separately in writing.
Three new crimes
The three new crimes, set out in the guidance, are applicable where a taxpayer fails to notify HMRC of their chargeability to tax, fails to file a return or files a return that is inaccurate in relation to offshore income, assets or activities.
In all cases, the additional tax must exceed a threshold of £25,000 ($35,334, €28,568) in any tax year.
The offences are “strict liability”, meaning that HMRC no longer needs to prove that a taxpayer’s actions were dishonest, Noble said. However, a taxpayer can put forward a defence of “reasonable excuse”, where the courts will take into account their circumstances, ability, knowledge and experience.
If HMRC choose to pursue a criminal investigation, a conviction in England and Wales for any of the three offences can come with a custodial sentence of up to six months and an unlimited fine.
In Scotland and Ireland, a conviction can come with a custodial sentence of up to six months or a fine not exceeding £5,000.
Noble said HMRC may also issue penalties starting at 200% of the tax liability where a taxpayer fails to correct errors in their tax returns relating to ‘offshore tax matters’, although penalties can be reduced to no lower than 100% of the tax liability.
In addition, in the more serious cases a further penalty of up to 10% of the value of a relevant asset can also be imposed and HMRC will be able to ‘name and shame’ the taxpayer on its website, Noble said.
The offences are part of an arsenal of measures designed to come into force in connection with the Common Reporting Standard (CRS).