The UK’s New Tax Evasion Penalties are Coming into Force

Her Majesty’s Revenue and Customs (HMRC), the British government department responsible for collecting taxes, has an increasing focus on offshore tax evasion in the wake of the Panama Papers scandal.

As part of this reinvigorated effort to crack down on people evading their tax responsibilities, HMRC now has the power to fine anyone who has helped a client to evade taxes, including bankers, accountants, lawyers, and other advisers. In addition to a fine up to £3,000, the department has the power to ‘name and shame’ any company implicated.

The measure was first proposed back in 2015 by then-chancellor George Osborne. The goal is to ensure that HMRC has the power to crack down on people who work to facilitate tax evasion. “Tax evasion is a crime, and as a government, we have led reform of the international tax system to root it out,” the financial secretary to the Treasury Jane Ellison said when announcing the new policies.

Closer to home we are creating a tax system where taxes are fair, competitive, and paid. The raft of measures we have introduced to tackle avoidance and evasion will create a level playing field for the vast majority of people and businesses who play fair and pay what is due.”

The May Administration has been a driving force behind these new penalties. It is anticipated that it will introduce further penalties and regulations in an effort to crackdown on British citizens evading their tax responsibilities. Along with these penalties, a new corporate criminal offense is expected to come into force this year, holding companies that fail to prevent the facilitation of tax evasion liable for such evasion.

Previously, prosecution in such a situation was only possible if there was proof that the board was directly aware of and involved in facilitating tax evasion. The government has also said there will be more actions in coming months. However, concerns have been raised regarding these new penalties and their potential infringement on client confidentiality privileges.

Specifically, HMRC has quarreled with lawyers over plans to make them reveal the names of clients holding offshore trusts and companies. Lawyers allege that it is a blatant breach of their clients’ legal rights. The Law Society said that it will work to “vigorously defend and protect legal professional privilege by all possible means, including litigation as necessary.”

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