The tax body made the comments in response to HMRC’s consultation on plans for tackling offshore tax evasion which closed on 8 October. This included a proposal for a new strict liability offence for offshore tax evasion which will require no proof that the taxpayer deliberately intended to evade tax. Possible penalties include a prison sentence of up to six months, even if there is no intent to cheat the system, CIOT points out.

John Cullinane, CIOT tax policy director, said: ‘We do not support this proposal because it cannot be right that an individual who simply makes a mistake in their tax affairs, without any intention to act wrongly, should be charged with, and possibly convicted of a criminal offence; think of an elderly person who does not realise that funds are taxable in the UK because they have already been taxed in an overseas jurisdiction; or someone who inherits an offshore account without any direct knowledge of it.’

‘We do not think that it is reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without guilt being proved beyond reasonable doubt.’

In addition, CIOT questions whether a new offence is necessary at all since HMRC already has wide criminal investigatory powers at their disposal.

The institute is also critical of HMRC’s efforts to ensure that the offence is targeted at only the most serious evaders, saying the threshold should be raised.

Cullinane said: ‘The proposed statutory minimum threshold of tax evaded of £5,000 is not high enough for complex cases - a threshold of £25,000 would be a more appropriate level. The CIOT also suggests that there should be a comprehensive post-implementation review of the measures and a “sunset clause” in the legislation so that HMRC would have to revert to Parliament to extend it.’

While CIOT welcomes the proposal for a statutory defence of reasonable care in the legislation, it says the safeguard would work better if the burden of proof was on HMRC to prove that reasonable care had not been taken, rather than the taxpayer being required to prove they took reasonable care.

‘We are also concerned that this proposal could be counterproductive for HMRC because the fear of prosecution, with no need to prove intention on HMRC’s part, could discourage taxpayers from coming forward voluntarily,’ Cullinane said.

 HMRC’s consultation, now closed, on tackling offshore tax evasion, is here

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