HM Revenue & Customs’ (“HMRC”) warning to offshore tax dodgers should be taken seriously


HMRC’s warning to offshore tax dodgers to correct any irregularities or face serious penalties should be taken seriously, says Gary Gardner, tax partner Blick Rothenberg.

HMRC’s press release issued of March 6 bristles with serious intent warning those with offshore assets that time is fast running out before the new tougher penalties for failing to correct offshore irregularities or non-reporting take effect on 1 October 2018. HMRC’s stark advice is that ‘anyone with overseas assets needs to put their cards on the table quickly or risk much bigger fines’, or worse!

Gary said, ‘It would be a very regrettable and expensive mistake to hope that this is just more ‘empty talk’ as HMRC have made it clear they will prosecute the most serious cases of tax evasion. 
‘Given criticism from both the National Audit Office (“NAO”) and the Public Accounts Committee (“PAC”) that HMRC are not doing anywhere near enough to combat evasion and avoidance by high- net-worth individuals (“HNWIs”) the pressure on HMRC to crack down on overseas evasion and avoidance using civil and criminal sanctions is greater than it has ever been.’
Gary suggested that those who are not deterred by the idea of a civil or non-criminal investigation should think again given that the penalties for failing to correct any errors or omissions relating to offshore interests will attract a penalty of up to 300% of the unreported tax shown to be due.
In addition, a further asset-based penalty will be applied of 10% of the asset value where it becomes clear the taxpayer was aware by the end of the 2016/17 tax year that they had offshore non-compliance to correct.
Gardner said, ‘Likewise, those dealt with civilly rather than criminally can also look forward to some free publicity, as HMRC will not hesitate to name and shame those with a failure to correct penalty exceeding £25,000. This is not a particularly large penalty for the HNWIs, but is another weapon in HMRC’s armoury.’
The fact that HMRC have also allowed themselves more time to investigate such cases by extending the time limit for making an assessment to tax by 4 years should ring alarm bells.
Gary said, ‘This will provide adequate time for HMRC to analyse the vast volume of financial data which will be automatically exchanged by over 104 countries so the more serious cases can be identified and either investigated criminally or investigated civilly under the procedures for the civil investigation of serious fraud.
‘In stark contrast those impacted and their advisers have just over 6 months to review what may complex affairs going back many years.’
He added, ‘Those impacted and their advisers must now act swiftly to review and identify any offshore errors and omissions and disclose these to HMRC before the deadline of 30 September 2018. Many offshore interests are technically complex and were designed with the anti-avoidance legislation current at the time the arrangements were put in place and much of this advice would have been generic rather than specific to a particular individual’s affairs.
HMRC’s guidance on what constitutes deliberate behaviour for penalty purposes includes omissions and errors from offshore investments where specific advice has not been obtained. Individuals falling into this category who do not identify and disclose any errors or omissions by the deadline will be very exposed to a criminal investigation and all that entails.’

For more information, please contact Gary Gardner.