Tax Faculty does not support proposals for new penalties or a notification requirement for offshore bank accounts
The Tax Faculty has submitted comments on HMRC’s consultation Tackling Offshore Tax Evasion. Our response is published as TAXREP 16/10.
The consultation is part of HMRC’s review of powers, safeguards and deterrents. It contains proposals in two main areas:
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A tougher penalty regime with higher penalties for non-compliance with an offshore element. In effect, all offshore non-compliance would be treated as though it were deliberate.
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A requirement for people opening offshore bank accounts to notify HMRC, except where the account is in a country which has automatic information exchange arrangements with the UK. There would be penalties for failing to notify HMRC within 60 days.
The Tax Faculty agrees – of course – that HMRC needs to tackle tax evasion (whether offshore or otherwise) and that it needs effective tools to do the job.
However, we do not support the proposals in this consultation. We do not think HMRC has got the balance right between the rights of the compliant majority and the need to tackle the small minority of tax evaders. The proposals for new powers, particularly the notification of offshore accounts, will place an unnecessary burden on the compliant majority while not necessarily catching the evaders.
We are not convinced by HMRC’s arguments that offshore non-compliance or evasion deserves tougher sanctions than the equivalent ‘onshore’ behaviour. We do not think there should be a new level of penalty specifically for offshore evasion. We strongly oppose the idea of treating all non-compliance – which term would include mistaken or careless behaviour not amounting to fraud – which has an offshore element as though it were deliberate.
With regard to the bank account notification requirement, we are concerned about the impact on people who have small offshore accounts for entirely innocent reasons, unconnected with tax. The burden on such people will depend on what Tax Information Exchange Agreements (TIEAs) the UK happens to have in place with their country of origin. A further concern is how, in practice, people will know about the notification requirement in the first place. HMRC will need to do a great deal of effective publicity and has yet has not given details of how it would go about this.
Full details of our views and comments are in TAXREP 16/10.