Accountancy firms predict that a new offence of aiding and abetting tax evasion and aggressive tax avoidance will be announced in next week’s Budget
It is expected that George Osborne will outline proposals to introduce special measures, aimed at professional service firms, to deter serial avoiders and scheme promoters.
The controversial proposals, including stiff penalties to tackle offshore evasion, had been quietly dropped until recent events forced HMRC to put them back on the agenda, according to BDO.
“Criminal sanctions for tax evasion already exist but only for those who intended to defraud the exchequer and there is a high burden of proof in a criminal trial. However, under the new proposals, HMRC will only need to demonstrate that a person failed to declare correctly their offshore income and gains and, therefore, intent becomes irrelevant,” said Dawn Register, partner, tax dispute resolution, BDO.
“HMRC recognises that the sanctions must be proportionate to the offence and as such, we predict a minimal threshold will be introduced which must be met before prosecution is considered. HMRC will not seek to prosecute if a taxpayer can show that they took reasonable care in conducting their tax affairs, or if they can show they had sought and followed appropriate professional advice. Even with these safeguards, this remains a highly controversial proposal,” she added.
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Whether the government intends to proceed with a proposal to introduce a specific penalty for tax avoidance schemes that fall under the general anti-abuse rule (GAAR) will also become clear, according to Baker Tilly.
Additionally, HMRC could announce a fundamental review of its prosecution policy to bring more people with tax irregularities into the criminal justice system.
“Given recent political and press focus, we can also expect the chancellor to announce a further crackdown by the government to tackle tax avoidance and evasion both harder and faster,” said Baker Tilly’s head of professional practices group George Bull.
Further detail is also expected on the OECD’s Base Erosion and Profit Shifting project as well as the Diverted Profits Tax or “Google tax”.
The legislation, aimed at preventing multi-nationals from diverting profits out of the UK was introduced in last year’s Autumn Statement as a result of lobbying and strong public and political opinion.
Currently due to be introduced from 1 April 2015, BDO expects it to be deferred until next year.