Responding to HMRC’s two consultations on proposals for tightening the penalties for offshore tax evasion, Dawn Register, partner, BDO tax dispute resolution said the clear aim was ‘giving more teeth’ to HMRC. 

‘In the past, in order to successfully prosecute a person for tax evasion, HMRC had to demonstrate beyond reasonable doubt that they intended to evade tax.  This proved a tough challenge and resulted in some notable failures. HMRC is now clearly seeking to strengthen its powers, across both civil and criminal sanctions, with the main focus on tackling offshore tax evasion; heavily penalising those who evade tax by moving money to a country where information exchange is limited,’ Register said.

CIOT spokesman Gary Ashford said that HMRC appeared to be pursuing a carrot and stick approach on undeclared offshore income, mixing disclosure facilities for those willing to become compliant with a bigger push against those who continue to evade.

However, Ashford said it was hard to see how non-declaration of tax could be considered a strict liability criminal offence, as up till now this category has mostly been used for matters with immediate risk to the public such as speeding offences or selling contaminated food. He described HMRC’s plans as ‘a hugely controversial step’.

Ashford also expressed concern about adequate safeguards for taxpayers who under-declare tax in error rather than deliberately, and who could face a criminal charge, a view which was echoed by Ronnie Ludwig, partner in the private wealth group at Saffery Champness.

‘The proposed powers do raise a number of concerns for taxpayers and advisors alike, given the relatively wide scope of who may end up in the firing line. 

'By focusing on those who fail to “correctly” declare offshore income and leaving behind the need for any intent to defraud, HMRC is delving into murky waters when it comes to maintaining proper checks and balances on these new powers.

'Extreme care and proper oversight will be required from HMRC when it comes to how these new weapons are deployed,’ Ludwig said.

Ludwig was sceptical, however, about the effectiveness of the new measures, saying: ‘The results to date of HMRC’s wider efforts to tackle evasion using existing measures have fallen far short of expectations, as we saw with the Swiss tax agreement. 

'The potential of handcuffs really represents more of a new scare tactic than anything else, as truly hardened evaders the world over are likely to continue to ignore or avoid the UK taxman.’  

But Derek Scott, head of personal tax investigations at KPMG in the UK said the new proposals had to be seen in the context of the increasing amounts of information HMRC is now receiving from many countries as a result of international cooperation agreements. 

‘Anyone taking the view they are out of sight and will not be discovered should think again or face up to the possible financial and/or criminal sanctions that could be awaiting them. Clearly there is no substitute for ensuring all your tax affairs are in order.

'HMRC disclosure facilities which offer unique terms expire in 2016, so the need for action has never been more important,’ Scott said.

Read HMRC to criminalise failure to declare offshore earnings for details of the consultations and parameters of the proposals.