Proposed offshore tax evasion offence could "quietly disappear" following omission from draft Finance Bill clauses

Out-Law News | 15 Dec 2014 | 3:34 pm | 1 min. read

Proposals which would introduce automatic criminal penalties for those who fail to declare taxable offshore income may "quietly disappear" following their omission from draft clauses for the 2015 Finance Bill published for consultation, an expert has said.

The draft clauses, which were published last week, take forward many of the measures included in the UK government's updated 'offshore evasion strategy', including tougher civil sanctions for those with taxable accounts offshore; as well as new measures to strengthen the disclosure of tax avoidance schemes (DOTAS) regime. However, it is yet to publish its response to a consultation on the proposed 'strict liability' offence, which was also issued in August.

"I think that the proposal is now likely to quietly disappear," said tax expert Ray McCann of Pinsent Masons, the law firm behind Out-Law.com. "There is no substance to it."

Currently, HM Revenue and Customs (HMRC) must prove that an individual intended to evade tax when that person failed to declare offshore income before criminal penalties may apply. In April, the government announced the creation of the new strict liability offence, which would only require HMRC to demonstrate that the taxpayer had failed to correctly declare income or gains, and not that this was done with the intention to defraud. The proposal as consulted on covered only assets subject to income tax or capital gains tax; and possible sanctions may have included custodial sentences in the most serious cases.

If passed in their current form, the measures included in the draft legislation would "extend, update and complement" the civil penalty regime which currently applies to tax cases involving an offshore element. From April 2016, the clauses would extend the existing penalty regime to inheritance tax and to domestic offences where assets are hidden offshore. Higher fines for those who move assets away from territories covered by the so-called 'common reporting standard' in an attempt to evade automatic exchange of tax information between that territory in the UK will take effect from the date that the Finance Bill receives Royal Assent.

With the general election taking place on 7 May, the parliament is due to be dissolved on 30 March. It is likely that there will be a pre-election Finance Bill and then another bill after the election. It is not clear whether these provisions will be included in the pre-election Finance Bill .