George Osborne has announced that the Government will consult on the introduction of a new strict liability criminal offence of failing to declare taxable offshore income in an effort to tackle tax evasion.4

Strict liability

Currently, HMRC must prove that an individual who has failed to declare foreign income actually intended to commit tax evasion in order to prosecute.  Under the new proposals, HMRC would simply have to demonstrate that the income was both taxable and undeclared in order for the criminal offence to apply. Thus, securing a conviction will become substantially easier and even those individuals claiming that they were advised incorrectly will be unable to avoid liability.

Penalties

The changes will bring tough new sanctions for those failing to disclose offshore income, with consequences of the criminal offence including an unlimited fine and even a prison sentence. The consultation is due to take place later this year, when HMRC will also consider the appropriate safeguards as well as strengthening the civil sanctions available.

At present, the financial penalties for tax evasion can be up to 200% of the tax owed, but the Government will look to increase this limit. In addition, the Government will consider extending the remit to include inheritance tax evasion. HMRC will also advertise its willingness to reward whistle-blowers for any significant information helping to expose hidden offshore accounts.

Next steps

Fifty-six thousand individuals have already come forward through the disclosure facilities and HMRC has urged those who still have tax liabilities to declare these now before HMRC come to them; failure to declare will result in a tax investigation and severe consequences.