Autumn Budget 2018 – Offshore tax compliance strategy

HMRC’s last offshore tax compliance strategy was published in 2014, entitled ‘no safe havens’. HMRC considers it has made significant progress since then in tackling offshore tax evasion. In the last four years we have seen the Liechtenstein Disclosure Facility, the Worldwide Disclosure Facility and the Requirement to Correct.

There are also now enhanced asset moves penalties for those who have moved or changed the ownership of assets to avoid detection by HMRC. In addition, there is also a strict liability criminal offence where HMRC do not need to prove underlying deliberate behaviour, only that the tax at stake exceeds the threshold of £25,000 in a tax year.

The Budget 2018 announced that the government will publish an updated offshore tax compliance strategy, and that it will build on progress made since the last strategy announcement. We expect to see continued focus on offshore tax evasion, especially now that HMRC has information sources in place to identify it accurately.

The Common Reporting Standard (CRS) is an international automatic exchange of information programme to which over 100 countries are signatories. The jurisdictions have undertaken to collect detailed financial information relating to non-resident individuals from financial institutions, and share this information with the jurisdiction the individual is resident in.

Although we expect it to take some time for HMRC to process and review the information it receives, we expect to see increased compliance activity as a result. As part of the RTC legislation, HMRC were granted extended assessing periods for non-deliberate offshore errors in tax years up to 2016/17. Assessing periods are extended to 12 years instead of the standard 4 or 6 years for a mistake or carelessness respectively. HMRC clearly intend to maximise revenue from the RTC legislation, and appreciate the length of time it may take them to review CRS information.

We believe that the publication of HMRC’s revised offshore tax compliance strategy will look to further strengthen sanctions for those with offshore non-compliance. With increasing sanctions for those whose offshore tax non-compliance is discovered and an ever-increasing quantity and quality of information being received, the risk has never been so great in using offshore jurisdictions to facilitate UK tax non-compliance.