Evasion-counteraction
The measure
The Government announced three new measures to counteract tax evasion:
- Publication of names of deliberate tax defaulters;
- New reporting requirements for deliberate tax defaulters; and
- An initiative targeted at offshore bank accounts.
Proposed legislation will allow HMRC to publish the names of both corporate and individual taxpayers who incur a penalty because they have deliberately understated over £25,000 of tax. Details will be published in quarterly lists on the HMRC website and will include the taxpayer's name and address, trade, profession or sector, and the amounts involved. Those who make an unprompted disclosure or a full prompted disclosure within the required time will be exempted from publication.
Those who have incurred a penalty for the deliberate understatement of tax of at least £5,000 will be required by HMRC to provide more information on their tax affairs for up to five years to ensure they have proper systems in place to allow a correct tax return to be drawn up, and allow HMRC to monitor future compliance.
A new offshore disclosure amnesty will run from Autumn 2009 until March 2010 for UK residents with unpaid tax connected to an offshore bank account. Those who make disclosures to HMRC under this initiative will be expected to pay the tax they owe, interest and penalties. The level of penalties will be announced before the scheme opens and is likely to be lower than that which would normally be imposed. HMRC announced that it is seeking to issue notices requiring financial institutions to provide information about offshore account holders.
Who is affected?
Those regarded as tax defaulters and holders of offshore bank accounts.
When?
The legislation for publication of names of tax defaulters will be included in Finance Bill 2009 but the operative date has not been announced.
The disclosure opportunity for offshore bank accounts begins in Autumn 2009.
There are already safeguards against the imposition of any penalty for deliberately (as opposed to carelessly) understating taxes, including the right to appeal to an independent tribunal. As a consequence of the legislation, a decision by an HMRC Inspector that a taxpayer's conduct was deliberate, as opposed to merely careless, will result in both publicity and increased reporting obligations. This will make the decision by HMRC to impose such a penalty contentious.
The renewed initiative targeted at tax evasion associated with offshore accounts should be seen in the light of the recent statements issued by the OECD and the G20, to the effect that tax evasion should not be tolerated.
So as to incentivise voluntary disclosure HMRC have aligned these 'sticks' with the 'carrots' of reduced penalties and the absence of publicity for early unprompted disclosures of understatements.
