Today HMRC launched a new ‘No Safe Havens 2019’ strategy. It sets out how HMRC will tackle tax issues to ensure the correct UK tax is paid. Unlike previous strategies, this focuses on all types of mistakes, not just tax evasion or avoidance. It also covers companies as well as individuals and trusts.
HMRC is helped by changes in the rules. It now has 12 years to assess additional tax in respect of offshore issues, rather than the previous 4 and 6-year time limits for cases involving reasonable care and carelessness. It already has 20 years to assess tax arising from fraud.
Strict liability criminal offences are now in existence so HMRC will no longer have to prove that taxpayers intended to declare insufficient tax, before it can obtain successful prosecutions. The expectations for businesses also increased as the government introduced corporate criminal offences for those who fail to prevent the facilitation of tax evasion.
The Requirement to Correct encouraged over 18,000 individuals to tell HMRC that they want to correct offshore non-compliance for past years before 30 September 2018. However, those who missed the deadline now face penalties exceeding 100% of the tax unless they had a ‘reasonable excuse’.
HMRC also focuses on offshore issues relating to companies and businesses’ UK tax affairs. This includes the new Diverted Profits Tax, together with investigations of multinational business activities to ensure that tax paid is commensurate with UK activities. Earlier this year, HMRC introduced a new compliance facility so that companies can voluntarily tell HMRC if they need to pay more UK tax for earlier years, before HMRC investigates them.
All of these investigations rely on data. HMRC benefits from tax information exchange agreements with over 150 countries worldwide and can request data from those jurisdictions’ tax authorities as well as issuing information notices to persons located anywhere in the world. HMRC received data on 5.67 million offshore accounts held by UK taxpayers in 2018. This is in addition to data from large multinationals showing a country-by-country breakdown of their profits, tax and assets. Its connect analysis program crosschecks UK and offshore data, identifying more than 500,000 cases for HMRC to challenge annually.
Going forward HMRC intends to develop its systems so that the data it holds will feed prompts to taxpayers via the tax return preparation process. This is to help avoid common mistakes, but of course, it could alert people to a more serious problem in their tax affairs. It hopes to improve signposting of useful, relevant information to taxpayers. Overall, the aim is to promote compliance and prevent non-compliance, so that HMRC can focus its resources on investigating complex cases and evasion using its civil and criminal powers.
The overall message is clear – HMRC will investigate and challenge companies, businesses, individuals and trusts who fail to declare the correct tax liabilities. This is regardless of whether the additional tax arises in connection with UK or offshore activities. Tax-geared penalties will be charged where appropriate, with higher penalties for those who fail to confess voluntarily before HMRC opens an investigation.