Further to our earlier blog in March 2016, the Finance Act 2016 received Royal Assent on 15 September 2016. The Finance Act 2016 creates new criminal offences that remove the need to prove intent for the most serious cases of failing to declare offshore income and gains. This blog post considers the new offences in further detail.

Offshore tax evasion

Section 166 of the Finance Act 2016 establishes new strict liability criminal offences for those who have income or gains outside of the UK and evade their UK income tax or capital gains tax responsibilities. Section 166 creates the offences by inserting new sections 106B to 106H into the Taxes Management Act 1970. The provisions criminalise the failing to give notice of liability to income or capital gains tax, failing to provide a return or failing to make an accurate return regarding offshore income, assets or activities. The key provisions in relation to the new offences are as follows:

  • The offences will apply if a taxpayer fails to notify HMRC of his chargeability to tax, fails to file a return or files an inaccurate return.
  • The offences will only apply to income tax and capital gains tax (although, this will be reviewed at a later date).
  • The offences will apply to all offshore income and gains, not just to under-declared investment returns.
  • There will be a minimum annual threshold amount of £25,000 of under-declared tax (HM Treasury can, be secondary legislation, increase this threshold amount).
  • When setting fines, courts and tribunals should take into account the corresponding civil penalties to ensure that those subject to civil penalties are not liable to tougher sanctions.
  • Conviction can result in a fine or prison sentence of up to 6 months (until section 285(1) of the Criminal Justice Act 2003 is brought into force – at which point the maximum custodial sentence will be raised to 12 months).
  • The offences will not apply to persons acting in the capacity of relevant trustees of a settlement, or as executor or administrator of a deceased person.
  • The new offences will not apply retrospectively but will first apply in respect of the tax year in which the offences are introduced. The offences are likely to take effect from April 2017 onwards.


As we have discussed before, HMRC are aggressively clamping down on all forms of tax evasion. Indeed, it is anticipated that the Chancellor will shortly announce further criminal measures in this field through the Criminal Finances Bill. This Bill is likely to contain various provisions in relation to tax evasion including, amongst other things, a new corporate criminal offence of failure to prevent the facilitation of tax evasion.

We have commented separately on the sensibleness of HM Government’s general approach to this matter. Notwithstanding our concerns, it is clear that, in tandem with the growing range of civil measures, individuals, corporates and their advisers need to be aware of HMRC’s increasingly probing approach to a person’s tax affairs and his tax planning.