The Government continues to take a tough line on tax avoidance, with both political and financial motives…

Building on its consultation document from July this year (HMRC consultation on strengthening sanctions for serial tax avoidance) it confirmed it will introduce legislation in the Finance Bill 2016 to implement the following measures:

  • a new criminal offence for tax evasion this offence will remove the need to prove intent for the most serious cases of failing to declare offshore income and gains;
  • new civil penalties for offshore tax evaders –civil penalties for deliberate offshore tax evasion will be increased. A new penalty will link to the value of the asset on which tax was evaded;
  • new civil penalties for those who enable offshore evasion – The Government will introduce civil penalties for those who enable offshore tax evasion. Quite what is captured within the scope of ‘enabling’ remains to be seen; and
  • General Anti-Abuse Rule (GAAR) – the Government will introduce a new penalty of 60% of tax due to be charged in all cases successfully tackled by GAAR.

In addition, the Government also announced plans (without indicating the proposed legislative path) for the following.

  • a new criminal offence for corporates failing to prevent tax evasion – this is aimed at corporates which fail to prevent their agents from criminally facilitating tax evasion by an individual or entity, widening the net substantially for those who will be ‘on the hook’; and
  • an additional requirement to correct past offshore tax non-compliance - a consultation exercise will be launched on an additional requirement for individuals to correct any past offshore non-compliance with new penalties for failure to do so.
  • disguised remuneration schemes: rules tightened - reflecting its determination to ensure everyone pays their fair share of tax, the Government is clamping down, yet again on disguised remuneration schemes. It intends to take action against those who have used or continue to use disguised remuneration schemes. While the details were not spelt out, the Government stated it will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015. For those employing these schemes, they will need to review their affairs very carefully and await further Government announcements. Disguised Remuneration Schemes (otherwise described as employment income through third parties) are viewed by the Government as anti-avoidance mechanisms. They are typically used by employers, directors and employees to avoid, reduce or defer income tax liability either for substantive employee rewards or to avoid restrictions on pension tax relief. The Government has legislated on them in the past and current announcements reflect its strong dislike of these structures.

The Government also announced that, if you seek to avoid tax, you are increasingly more likely to be named and shamed in public.