The government is committed to raise £5bn from tax avoidance, and this week the Chancellor indicated that £800m would be given to HMRC to help do this and to tackle non-compliance. The Autumn Statement also introduced tougher penalties and criminal offences which are all clear signs of the tougher attitude to come down hard on evasion and avoidance. Some of the key points are highlighted below:
- A new criminal offence for tax evasion – A criminal offence that removes the need to prove intent for the most serious cases of failing to declare offshore income and gains will be introduced.
- New civil penalties for offshore tax evaders – Civil penalties for deliberate offshore tax evasion will increase, including the introduction of a new penalty linked to the value of the asset on which tax was evaded and increased public naming of tax evaders.
- New civil penalties for those who enable offshore evasion – Civil penalties will be introduced for those who enable offshore tax evasion, including public naming of those who have enabled the evasion.
- New criminal offence for corporates failing to prevent tax evasion – A criminal offence will be introduced for corporates which fail to prevent their agents from criminally facilitating tax evasion by an individual or entity.
- An additional requirement to correct past offshore tax non-compliance – With the LDF set to close at the end of 2015, the government will consult on an additional requirement for individuals to correct any past offshore non-compliance with new penalties for failure to do so.
- Serial avoiders – Tough new measures will be introduced for those who persistently enter into tax avoidance schemes that are defeated by HMRC. Measures will include the names of such avoiders being published, and for those who persistently abuse reliefs, restrictions on accessing certain reliefs for a period.
- General Anti-Abuse Rule (GAAR) – A new penalty of 60% of tax due to be charged will be introduced in all cases successfully tacked by the GAAR. In addition, there will be small changes to the way the GAAR works to improve its ability to tackle marketed avoidance schemes.
- Promoters of Tax Avoidance Schemes (POTAS) regime – The government will also widen the POTAS regime, by bringing in promoters whose schemes are regularly defeated by HMRC.
- Capital allowances and leasing – With effect from 25 November 2015, legislation to counter two types of avoidance involving capital allowances and leasing will be amended. These changes will prevent companies from artificially lowering the disposal value of plant and machinery for capital allowance purposes.
- Disguised remuneration – action will be taken against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax.
- Taxation of asset manager's performance based rewards – legislation will be introduced to determine when performance awards received by asset managers will be taxed as income or capital gains.
- Partnerships and transfers of intangible assets – The government will amend the intangible fixed asset rules to clarify the tax treatment on transfers of assets to partnerships. This change has immediate effect and will ensure that partnerships cannot be used in arrangements that seek to obtain a tax relief for their corporate members in a way that is contrary to the intention of the regime.
It is worth noting that many of the individuals referred to as 'Serial Avoiders' will be financially unsophisticated people who were aggressively mis-sold marketed tax avoidance schemes. Presenting them with special reporting requirements and publishing their names is part of the Government's objectives to come down hard on individuals, but is this helpful when a significant number were misinformed by the professionals whose advice they trusted?
Consultation on a new requirement to correct offshore tax non-compliance will pick up after the Liechtenstein Disclosure Facility closes at the end of this year and will definitely carry much stiffer penalties and no protection from prosecution. There are still steps individuals can take now in order to make a disclosure via the Liechtenstein Disclosure Facility before it closes at the end of 2015 and Withers is working with individuals in doing so. Owing to the need to establish a connection with Liechtenstein, the deadline to act is really by the middle of December.
HMRC's harder line to also name and shame the enablers of offshore evaders and enforce new civil penalties is clearly directed at certain offshore advisors and may cause some concern. HMRC have highlighted to those professionals who have submitted an LDF disclosure on behalf of a client what these new initiatives are. It comes as no news that Switzerland is already in their sights, but with these new initiatives and the coming of the CRS it seems quite likely that there will be another focus on Swiss banks and intermediaries.
2016 will see the Government move forward with these new measures and Withers' Tax Investigations team is working closely with our clients and intermediaries to help them understand what these tougher measures mean and what they can do about them.