Chancellor extends tax evasion measures in UK Summer Budget

06 August 2015

There was no let-up in the Government’s and HMRC’s message regarding tax evasion, with significant announcements and publications on how they intend to crack down on offshore tax evaders.

There was enough in the UK Summer Budget on increased reporting and tougher actions on non-compliance to fill a small book. However, we have highlighted the key points for your information below:

Common reporting standard (CRS)

  • The introduction of the CRS in two years’ time will bring about a significant change in the way in which countries will share financial information.
  • HMRC has been ‘tooling up’ on its risk profiling capability and traditional hiding places for tax evaders are becoming increasingly transparent.

New disclosure facility

  • Last quarter we advised on the early closure of the existing disclosure facilities and of a new but less favourable facility in 2016.
  • Details of the ‘last chance’ facility are still not known but are expected to be published shortly.

Closer scrutiny of more businesses and individuals

  • The Government will consult over the summer on enhanced compliance measures for large businesses.
  • The definition of ‘large business’ will be extended to bring more businesses into the scope of HMRC’s Compliance Relationship Manager regime, thereby increasing scrutiny on more businesses.
  • The proposed new measures include compelling large businesses to publish their tax strategy.
  • HMRC’s High Net Worth Unit deals with the tax affairs of about 5,000 of Britain’s richest people. Since the HNWU was set up in 2009 it has delivered year-on-year increases in extra tax yield.
  • Tackling non-compliance by wealthy individuals and offshore trusts is high on the agenda and in detail, this means extending the remit of the HNWU from individuals with assets more than £20m to individuals with assets more than £10m and pursuing more criminal investigations against wealthy tax evaders.
  • The Government will also be investing £36m over the next five years to tackle perceived non-compliance by trusts, pension schemes and non-domiciled individuals.

Prosecutions

  • The Chancellor earmarked a further £60m to facilitate an escalation of prosecutions of tax evaders.
  • The expectation is that criminal prosecutions will raise £600m over the next five years.

Once again, the general burden on intermediaries, particularly with the introduction of the CRS, has grown and for some who fail in their responsibilities, public humiliation and even prosecution might be their horrible fate following the announcement by the Financial Secretary to the Treasury on 16 July, where he set out plans for tougher sanctions under a new regime to crack down on offshore tax evaders.

The consultations published at the time of the announcement include proposals for:

  • a new criminal offence for offshore evasion – ignorance may no longer be an excuse;
  • a new offence for corporate bodies who fail to prevent the facilitation of tax evasion by their staff or agents;
  • increased fines, possibly linking this to previously hidden offshore assets;
  • civil penalties for those who promote evasion;
  • naming and shaming of evasion promoters as well as the evaders.

This is the strongest demonstration yet of the Government’s commitment to seek out and expose tax evasion, evaders and those who facilitate evasion. Now it is not only evaders who need to keep looking over their shoulder, but those who facilitate evasion and, whether directly or indirectly, intermediaries may end up paying dearly for clients not paying ‘their fair share’.