HMRC’s recently-unveiled Offshore Evasion Strategy allows people to report undisclosed taxable income held in Crown Dependencies in return for lower penalties. But does it spell the end for offshore? Jon Claypole, a Partner at Mazars, delves into the document
The recent publication of HMRC’s Offshore Evasion Strategy suggests the introduction of ‘disclosure opportunities’ – for UK resident taxpayers with previously undisclosed income from assets in Jersey or Guernsey – may mean the end of such facilities for the foreseeable future.
The document contains an action plan setting out a timeline up to 2017 and beyond. Interestingly, after the completion of agreements with the Crown Dependencies (the Isle of Man, Jersey and Guernsey) and the coming into force of the UK-Swiss agreement, the document makes no suggestion of HMRC seeking to enter into any similar agreements with other countries.
Instead, it talks of HMRC making use of the data that it will be obtaining from offshore institutions to pursue tax evaders in the UK.
Lower penalties for disclosing offshore taxes
The Jersey and Guernsey disclosure regimes are set out in Memoranda of Understanding between HMRC and the Governments of Jersey and Guernsey. The facilities allow relevant people to disclose previously undisclosed taxable income. They must do this between 6 April 2013 and 30 September 2016 and, in return, they will be entitled to lower penalties.
Not every taxpayer who has an undisclosed bank account in Jersey or Guernsey will be able to participate, of course, and the disclosure facility is specifically denied to individuals who are subject to an investigation. Similarly, less beneficial terms will be available to anyone whom HMRC contacted under any of the previous offshore disclosure facilities, but who failed to respond.
HMRC’s next target after Jersey and Guernsey
A review of the HMRC action plan suggests that, after Jersey and Guernsey, it will now focus on using the data that it already has, along with the data it will be obtaining under its many Exchange of Information agreements, to build an ‘Offshore Evidence database’. This will form the basis for its on-going investigation programme.
The overwhelming message from the strategy document, which is repeated on several occasions throughout, is that there can be ‘no safe havens’ from HMRC tax enquiries, and that evaders who continue to attempt to hide untaxed income in offshore assets or accounts can expect to face the full weight of the legislation.
What we advise clients to do
Our advice to clients with offshore bank accounts or assets – whether in the Isle of Man, Jersey , Guernsey or elsewhere – is to give serious consideration to coming forward and disclosing the existence of them to HMRC.
The various disclosure regimes still offer an attractive solution to settlement of any tax liabilities compared to waiting for HMRC to commence its own investigations. This way the whole process can be managed in a way that alleviates any stress.
Mazars will be giving a more detailed update on this and wider tax investigations issues at AAT’s Members’ Weekender in May.
Jon Claypole is a partner at Mazars.