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HMRC plans for tackling offshore tax evasion are seriously flawed, say lawyers

Kingsley Napley dismisses new proposals as unclear, unworkable, and unjust

13 October 2015

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New powers proposed to help HMRC 'crack down' on offshore tax evasion are seriously flawed, accordingly to lawyers at Kingsley Napley.

Plans to introduce a strict liability offence for individuals who evade tax were given short shrift by the London-based firm in its response to the HRMC consultation exercise.

In its submission, Kingsley Napley's said: 'We understand HMRC's policy objective in pursuing tax evaders and the political and media pressure currently being played out during party conference season. However, the proposals as they stand are unclear, unworkable and ultimately unjust.

'To impose what would essentially be a reverse burden of proof in circumstances where an individual would be facing a potential custodial sentence cannot be reasonable. Resources should not be spent on developing a new system that is inherently unfair and which defeats its very purpose.'

David Sleight, a partner in the criminal litigation team at Kingsley Napley, commented: 'It is disappointing that HMRC has not taken previous strong opposition to this measure on board.

'Tax evasion by definition requires a deliberate act to deprive the Revenue of monies to which it is entitled. There must therefore logically be a specific intent to evade tax for the offence to be made out.'

The partner, who specialises in defending both companies and individuals facing actions by HMRC, said the basis of any prosecution should require proof of fraudulent or dishonest behaviour: 'The problem with what is proposed is that someone could be found guilty of committing tax fraud following a genuine mistake.'

Sleight continued: 'No examples have been given of the kind of behaviour which would be caught by the proposals that are not already covered by offences under current tax evasion provisions.

'The proposed legislation is complex, confusing and is likely to create more litigation than it resolves. The lack of clarity rather defeats the purpose of the proposed legislation which was apparently designed to be simpler to administer.'

While Kingsley Napley said it recognised HMRC was aware of the inherent unfairness of a strict liability offence and had proposed a number of defences including 'reasonable excuse' and 'reasonable care' for not providing accurate information regarding offshore income or assets, the firm felt these compromises were currently ill-defined.

'It is not clear to us whether guidance will be issued or whether HMRC will simply wait for the courts to decide,' added Sleight. 'It is our view that it would have been more appropriate to focus resources on effective enforcement under the civil regime and existing criminal measures rather than create a new offence with a series of caveats and defences.'

This article first appeared in PCA's sister publication, Solicitors Journal

Categorised in:

Tax & Wealth structuring