New offence for offshore evasion criticised

The Chartered Institute of Taxation (CIOT) has criticised the government’s decision to press ahead with the introduction of a new ‘strict liability’ offence for offshore tax evasion. 

Although the CIOT says it is “generally strongly supportive” of the tax authority’s efforts to tackle evasion, it opposes the creation of a criminal offence which will require no proof of intention.

“Any new measures should be based on sound legal principles,” the institute said. “One of these is that in order to make a criminal conviction it should generally be required to show that the act was committed with criminal intent.”

But the proposed strict liability test for failing to declare overseas income and gains “fails this test,” as a person may fall within the offence without any motive to evade or even knowledge of evasion.

The CIOT’s Patrick Stevens said: “We cannot conceive that it would ever be reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without guilt being proved beyond reasonable doubt.

“In light of our concerns, we look forward to engaging with HMRC on the further consultation that has been announced to consider appropriate defences and thresholds.

“However, they will do nothing to change the fact that someone who has no intention to evade tax could still be liable to criminal sanctions, and we think this is wrong.”

The government has also announced that it would consult on introducing a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. 

Another consultation will run on new civil penalties for those that enable others to commit tax evasion, and the public naming of such enablers. 

“There is already plenty of law in this area,” cautioned Mr Stevens. “But if it is felt that criminal sanctions need to be strengthened – for example, outside the currently regulated sectors – then we would be pleased to work with the Government to frame proposals that will effectively achieve this.”