HM Revenue and Customs (HMRC) is on the prowl again. A new information sharing system will be introduced in April 2016 to assist HMRC in clawing back millions in unpaid tax by those with offshore assets. Before the new initiative is launched, HMRC is giving tax dodgers the chance to pay up and avoid heavy fines and criminal sanctions.On the 27 November 2015, David Guake, the Financial Secretary to the Treasury, announced a global scheme to tackle offshore tax evasion. 90 international jurisdictions have signed the agreement, known as the Common Reporting Standards (CRS), which will allow financial institutions to access information on an individual’s assets, accounts and wealth records in the affiliate countries. Consequently, this information will also be accessible by HMRC, who will then be able to target individuals with overseas assets who fail to pay the correct amount of tax, made possible because of the gaps in the current Offshore Disclosure Facilities.
However, the 2015 Budget announced the closure of two Offshore Disclosure Facilities: The Liechtenstein Disclosure Facility (LDF) and the Crown Dependency Disclosure Facility (CDDF). The closures have been heavily anticipated for years due to individuals being able to use loopholes in the disclosure facilities to avoid tax and to protect themselves from being liable for it. An example of this is the popular LDF, which provides assurances to those with offshore assets that they will face no criminal sanctions and will only be liable for a fixed penalty of 10%. To tackle this tax avoidance both facilities will seize as of 31 December 2015, which is expected to bring back £565million for the tax payer.
David Guake stated, “Hiding money in another country at the expense of honest UK taxpayers is not acceptable and we have made it clear we will put a stop to it… the small minority who evade tax offshore, facilitate or turn a blind eye to offshore tax evasion will face tougher sanctions”. As the disclosure facilities end shortly; it is without doubt that HMRC will be on the prowl for those who are paying the incorrect amount of tax, I would strongly advise those who are trying to evade tax by keeping funds offshore to come clean on their affairs before the tougher facilities come into play. I would imagine those who fail to do so will face heavy criminal and financial sanctions.