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Phil Wickenden: HMRC intent on using new rules to catch tax offenders

Phil WickendenA review of clients’ offshore arrangements will be very sensible in light of HM Revenue & Customs’ stated intent to get tough on hidden assets.

Since the data leak from Panama in 2016, which exposed a web of secret offshore companies that individuals have used to hide wealth, evade taxes and launder money, fraud involving high earners has become an increasingly high-profile issue for HMRC.

To underline its intent, the number of tax evasion cases it identified for 2017/18 was 3,809 – an 18 per cent rise on 2016/17 (3,216 cases). It is targeting 100 prosecutions of wealthy individuals and corporates each year until 2020.

To help its cause, HMRC has extensive new data collection powers (as the rest of the world has had theirs curbed as a consequence of General Data Protection Regulation, under which businesses must keep their customers’ information private at all times). Under the Common Reporting Standard, businesses in participating countries must share certain information about their foreign resident clients with the authorities.

HMRC will no longer need to prove people are evil masterminds who conspired to defraud the Treasury from deep within their volcano lair

The ever-increasing sources of data HMRC has access to are helping it uncover more and more cases of non-compliance. While this may legitimately give rise to concerns about government overreach into private affairs, protestation and indignation are unlikely to form a sound basis for defence if clients’ affairs are (knowingly or otherwise) not as they should be.

New rules taking effect from this year make it a crime to fail to declare offshore income resulting in tax of £25,000 or more, so now is a good time for a review.

These are called strict liability offences, meaning HMRC no longer needs to prove such people are evil masterminds who conspired to defraud the Treasury from deep within their volcano lair. It simply needs to be shown that they did not take reasonable care in preparing their tax returns.

Yes, it is going to be rare somebody realises they had mountains of cash buried behind the offshore sofa which they simply forgot about, but a lot of high net worth individuals have complicated lives with assets and interests spread over a number of jurisdictions.

They will need to make sure they and their advisers have a full grip on matters by the first reporting deadline in October, because after that HMRC will go looking – and they will have the powers to turn an innocent error into something much more serious.

Phil Wickenden is managing director at Cicero Research



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