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Penalties now in force in UK for 'enablers' of offshore tax evasion

Thursday, 5 January, 2017

On 19 December, HM Treasury adopted regulations bringing s162(1) and Schedule 20 of the Finance Act 2016 into force. These allow heavy civil penalties to be imposed from 1 January this year on persons who have enabled offshore tax evasion or non-compliance by another person.

Penalising 'encouraging' or 'facilitating' evasion

The Finance Act 2016, s162(1) and Schedule 20 (Appointed Day) Regulations 2016 apply to income tax, capital gains tax and inheritance tax. Any individual or body that provides tax planning, advice or other professional services, or physically moves funds offshore, to help others evade these taxes may be charged up to 100 per cent of the evaded tax, and may also be publicly named. It is not necessary for the perpetrator to have played an active part: merely encouraging or facilitating the evasion is sufficient.

Building pressure around tax evasion and avoidance

According to the government, the UK is one of the first countries in the world to introduce such legislation. 'This announcement further highlights the pressure that is continuing to build around tax evasion and avoidance, especially in the build-up to April 2017 where we will see the commencement of the serial avoiders special regime', commented Dawn Register TEP of tax advisors BDO. 'Most tax professionals have already seen a change in appetite for highly artificial tax schemes, with many taxpayers being conscious of HM Revenue & Customs' actions in this area.'

Requirement to correct

The new regime is backed by a 'requirement to correct' forcing taxpayers with any offshore-related tax matters – and their advisors – to double check that their UK filings are accurate. 'We expect this will lead to an increase in voluntary disclosures prior to the deadline of 30 September 2018', Register said.

  • The UK also intends to introduce a new corporate criminal offence of failing to prevent the facilitation of tax evasion later this year. It will be brought into force by the Criminal Finances Bill 2017 and will have extraterritorial effect with significant implications for global companies.
  • All STEP members who advise on UK tax must also adhere to guidance on Professional Conduct in Relation to Taxation (PCRT). This guidance has been developed and published by all UK accounting and tax professional bodies. The latest revision to PCRT launched on 1 November 2016 and becomes effective from 1 March 2017.