Offshore tax evasion is the process of using a non-UK jurisdiction to shelter income and gains from UK tax.
The hidden nature of tax evasion and the way that information is currently recorded mean that there is no clear view of the cost of offshore evasion. However HMRC, with the full support of the government, is stepping up its campaign against offshore evasion.
Committing increasing resources to tracing those who conceal income, assets and gains overseas to evade tax, HMRC’s approach is to reduce the opportunities for tax evasion and increase the likelihood of evaders being detected. The principal aim of the strategy is to ensure that there are no jurisdictions where UK tax payers feel safe to “hide” their income and assets from HMRC, and they plan to strengthen the severity of punishment.
Bilateral agreements have been signed with the US, France, Germany and Spain, and Britain has also reached specific agreements with Liechtenstein, the Isle of Man, Jersey and Guernsey, as well as with Crown Dependencies such as the Cayman Islands, Anguilla, Bermuda, the British Virgin Islands, Montserrat and the Turks and Caicos Islands.
Today, HMRC is better informed, with access to internet search facilities and sophisticated software enabling tax inspectors to link all sources of information. Historically, offshore accounts and other complex arrangements were shrouded in secrecy, so some people thought they could avoid their UK tax obligations by not declaring their income from these sources. With the huge and ever expanding range of data available to HMRC, including details of sources of income, those days are rapidly disappearing. The flow of information to HMRC will increase as new disclosure agreements are reached with other jurisdictions.
All of the disclosure agreements require financial intermediaries to contact their UK based clients to make them aware of the facility and to get confirmation from their clients that they are compliant with their UK tax obligations. Going forward, financial intermediaries will be unable to act for clients who are not compliant in their tax affairs.
The ability to regularise your tax affairs by taking advantage of available tax disclosure facilities is time limited and in most cases will cease in 2016, when automatic exchange of information between the UK and various countries will commence. It is important to take advice on the most appropriate facility to suit your particular circumstances.
There is now an escalated focus worldwide on tackling tax evasion. The message to those with undeclared offshore monies is clear - with increasing ability to detect hidden income, assets and gains, and with the consequences of detection being penalties of up to 200% of the evaded tax, together with possible criminal prosecution, the time to disclose is now – there are no safe havens.
Blick Rothenberg has acted in a significant number of tax disclosure cases. We have a close relationship with HMRC and can agree an approach on a no names basis before the disclosure papers are submitted.