Nullify offshore offence below £25k, HMRC told

Safeguards on the ‘strict liability’ offence for offshore evasion under which people can be jailed without proof they intended to cheat the taxman don’t go far enough, accountants warn.

The Chartered Institute of Taxation says that the proposed statutory minimum threshold of tax evaded - £5,000 - is not high enough to protect people in the more complex cases.

The threshold, set by HMRC as the level below which the offence cannot bite, is meant to ensure that people who make errors over relatively small sums of tax do not receive a prison sentence of up to six months.

But the threshold should actually be set at £25,000 – “a more appropriate level,” says the CIOT, assuming that the Revenue’s aim is to hit only the most serious of offshore tax cheats.

A comprehensive post-implementation review of the measure should also be introduced with a ‘sunset clause’ in the legislation, so HMRC would have to revert to parliament to extend it.

“We are pleased to note that there will be a statutory defence of reasonable care”, added the CIOT’s John Cullinane. “This will be vital in limiting the scope of the offence.

“But it would be a stronger safeguard for the taxpayer if the burden of proof was on HMRC to prove that reasonable care had not been taken, rather than being on the taxpayer to prove they took reasonable care.

“We are also concerned that this proposal could be counterproductive for HMRC because the fear of prosecution, with no need to prove intention on HMRC’s part, could discourage taxpayers from coming forward voluntarily.”