Offshore tax evasion

The Government seeks to strengthen HMRC’s ability to pursue offshore tax evaders. The Chancellor now proposes significantly higher new penalties for tax evasion involving income and capital gains arising in overseas jurisdictions with limited and low tax transparency.

Baker Tilly analysis

Building on an announcement made in the Pre-Budget Report, the Chancellor has introduced an extension to behaviour-based penalties applicable to offshore tax evaders. The expected start date for these new penalties is 1 April 2011. Where evasion is “deliberate and concealed”, penalties of up to 200% of the tax lost will apply to irregularities involving overseas jurisdictions depending on whether the UK has any agreement to exchange information.

In other jurisdictions where the sharing of information is not automatic, penalties of up to 150% can apply. Emphasising the attack on offshore non-compliance, new tax agreements are to be signed with Dominica, Grenada and Belize. HMRC also estimates that the
Liechtenstein Disclosure Facility (LDF) set up last year will yield some £940 million in the period to closure in March 2015.