HMRC has announced that ‘enablers’ (individuals or businesses) who take deliberate action to help others evade paying tax face steep fines with new penalties from New Years Day and may also be ‘named and shamed’. Enablers face fines of up to 100% of the tax they helped evade or £3,000, whichever is highest.
Additionally, a new corporate criminal offence of failing to prevent the facilitation of tax evasion will also be introduced this year, with businesses held liable if an employee or contractor facilitates tax evasion. Previous rules meant a corporate criminal prosecution was only possible if there was proof that the company’s board were aware and involved in facilitating the evasion. Added to this is another announcement that 1st January brought into force a new requirement to correct past tax evasion, which will see anyone who failed to correct past evaded taxes by 30th September 2018 hit with tough new penalties. More action is planned in the coming months, including a consultation on a new requirement for businesses and individuals who create complex offshore financial arrangements that bear the hallmarks of enabling tax evasion to notify them to HMRC.
Although in principle this sounds like a very good idea and one which many professional tax advisers will agree with, history does not bode well. The Treasury said HMRC had secured more than £2.5bn specifically from offshore tax evaders since 2010. However, the department was criticised last November after its new specialist tax evasion unit only successfully pursued just one criminal prosecution, despite having identified potential evasion and avoidance worth nearly £2bn after examining the tax affairs of 6,500 wealthy individuals.
Questions will also be asked of HMRC’s ability to carry out investigations into tax evasion following the announcement that HMRC will consolidate their staff in ‘regional hubs’ rather than their current number of offices. The organisation plans to save £100m by reducing the number of offices from 170 to 13 ‘hubs’. There are currently 58,000 people employed by HMRC, but this number is planned to fall over the coming years.
The plan is part of a wider Government Hubs programme that aims to free up land and property and raising £5bn from property sales by 2020. We shall see whether the equation of chasing tax evaders versus staff and office consolidation will be solid, but it doesn’t tax a mathematician to work out the flaws in HMRC’s sums.