Plans to stiffen the penalties for offshore tax evasion have been criticised by lawyers and tax advisers who have warned that they could end up criminalising people and companies who have unwittingly broken the rules.
The Treasury has put forward proposals for a new criminal offence for companies that facilitate evasion as well as a “strict liability” offence of offshore tax evasion, meaning that an individual can be prosecuted even if there was no intention to break the law.
The Chartered Institute of Taxation (CIOT) has voiced its “strong opposition” to the principle of a strict liability offence for tax evasion. It noted that the Treasury aimed to target only the most serious offshore tax evaders, but warned of a risk that once the legislation was in place, “it could be used much more widely by a future administration and not confined to cases where there is clear criminal intention.”
CIOT also called for strong safeguards for companies accused of the proposed new corporate criminal offence of failing to prevent the facilitation of evasion. It has called for the burden of proof to be placed on HM Revenue & Customs (HMRC) to show that a company did not take “reasonable care” to prevent its staff facilitating evasion, rather than the other way around. It said: “We think that the defences to this offence are absolutely key because there does not seem to be any requirement for the corporation to have deliberately intended to facilitate tax evasion even though this is a proposed criminal offence.”