Tax administration: civil sanctions for enablers of offshore tax evasion
Published 9 December 2015
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Who is likely to be affected
Individuals and businesses who deliberately assist taxpayers to hide assets, income and gains offshore.
General description of the measure
This measure introduces new civil penalties and naming provisions for those who have deliberately assisted taxpayers to hide assets and taxable income and gains outside of the UK to evade their UK tax responsibilities. The penalty only applies where (i) the enabler’s behaviour was deliberate; and (ii) the evader has received a penalty relating to offshore tax non-compliance, either through deliberate behaviour or because they failed to take reasonable care.
The penalty for the enabler can be up to 100% of the tax evaded.
Naming will be reserved for the most serious enablers. In addition, enablers who have been given the maximum penalty reduction for a full disclosure (whether prompted or unprompted) will be protected from publication.
Policy objective
Those who do not pay the tax due on income or gains which arise outside of the UK have a real impact on honest taxpayers. They deprive the government of much needed funds to run public services and place a greater burden on the vast majority of people who pay their fair share of tax.
The measure will reduce non-compliance with the UK’s tax system by deterring individuals and businesses from deliberately assisting taxpayers who use another tax jurisdiction and don’t declare the tax they owe.
These new sanctions will allow HM Revenue and Customs (HMRC) to tackle for the first time, in a consistent way and using civil rather than criminal sanctions, those who aid and abet tax evasion. This is a valuable tool which will provide a strong deterrent effect against enabling non-compliance.
Background to the measure
The measure was announced at Budget 2015. A consultation opened on 16 July 2015 and closed on 8 October 2015.
Detailed proposal
Operative date
The measure will be included in Finance Bill 2016 but will be subject to a commencement order.
Current law
There is no current legislation which deals with all deliberate enablers using civil sanctions.
Proposed revisions
Legislation in Finance Bill 2016 will introduce new civil penalties and naming provisions for those who have deliberately assisted tax evaders to hide assets and taxable income and gains outside of the UK to evade their UK tax responsibilities.
Summary of impacts
Exchequer impact (£m)
| 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
There are no expected impacts on tax compliant individuals and organisations. The sanctions will only affect individuals and organisations who enable offshore tax evasion.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not expected that these civil sanctions have a differential impact on any group with protected characteristics. HMRC does not hold data on the protected characteristics of non-compliant taxpayers.
Impact on business including civil society organisations
This measure will have no impact on business and civil society organisations who are undertaking normal commercial transactions; it will only impact on businesses which deliberately enable offshore tax evasion.
Operational impact (£m) (HMRC or other)
There will be costs to HMRC to amend its IT systems, and these are estimated to be around £250,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected during compliance work to ensure the legislation operates as intended.
Further advice
If you have any questions about this change, please contact Philippa Madelin on Telephone: 03000 585507 or email: philippa.madelin@hmrc.gsi.gov.uk.