The offshore penalty regime came into force on 6 April 2011. It imposes increased penalties in cases involving territories with limited tax transparency. At present, this penalty regime does not apply to inheritance tax.
Following consultation, the government is to extend the offshore penalties regime to:
- include inheritance tax;
- apply to domestic offences where the proceeds of UK non-compliance are hidden offshore;
- update the territorial classification system;
- introduce a new aggravated penalty, up to a further 50% of the tax lost, for moving hidden funds to circumvent international tax transparency agreements.
Most of these changes will come into effect from April 2016; however, the aggravated penalty for moving assets will come into force following Royal Assent of Finance Act 2015.
The aggravated penalty idea is a novel way of deterring offshore evasion; however, as more and more jurisdictions sign up to the automatic exchange of information, the government feels it necessary to impose new penalties on those who move their funds to escape scrutiny.