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The UK government has taken substantial measures to combat offshore tax evasion, tax avoidance, and enablers of offshore tax evasion or non-compliance. This comprehensive guide explains the differences between tax evasion and avoidance, highlights the UK government’s and HMRC’s approach to tackling these issues, and discusses the penalties imposed on enablers of offshore tax evasion or non-compliance.
Understanding Offshore Tax Evasion and Avoidance: Offshore tax evasion involves illegal practices to reduce tax liability, such as hiding income or assets in foreign jurisdictions. In contrast, tax avoidance involves exploiting legal loopholes in tax laws to minimise tax liabilities, although it can still be challenged by HMRC.
HMRC’s Stance on Offshore Tax Evasion and Avoidance: HMRC has implemented a robust strategy to combat offshore tax evasion and avoidance, which includes the Common Reporting Standard (CRS), Requirement to Correct (RTC), Corporate Criminal Offence (CCO), General Anti-Abuse Rule (GAAR), Disclosure of Tax Avoidance Schemes (DOTAS), and stringent action against promoters of tax avoidance schemes.
Enablers of Offshore Tax Evasion or Non-Compliance: Enablers are individuals or entities that knowingly, actively, and deliberately assist or advise taxpayers in committing offshore tax evasion or non-compliance. This could include accountants, financial advisors, tax agents, lawyers, or other professionals involved in taxpayers’ tax affairs.
Penalties for Enablers: The UK government imposes penalties on enablers of offshore tax evasion or non-compliance, calculated as a percentage of the potential lost revenue (PLR) resulting from the taxpayer’s non-compliance. The standard penalty rate is 100% of the PLR, which can be increased to 150% in deliberate and concealed behaviour cases. However, HMRC may reduce the penalty if the enabler fully cooperates during the investigation.
Naming and Shaming: HMRC has the authority to publicly name enablers involved in offshore tax evasion or non-compliance as a deterrent to others and to maintain public confidence in the tax system.
Right to Appeal: Enablers can appeal against penalties imposed by HMRC within 30 days of receiving the penalty notice. Appeals are heard by the First-tier Tribunal, an independent body, and can be further appealed to the Upper Tribunal and higher courts.
Assisting Taxpayers to Correct Offshore Non-Compliance: Enablers can help taxpayers correct their offshore non-compliance by assisting them in making full disclosure to HMRC, which can lead to reduced penalties for both the taxpayer and the enabler.
Taxpayers, professionals, and enablers involved in tax affairs must understand the distinctions between offshore tax evasion, tax avoidance and the consequences of facilitating offshore tax evasion or non-compliance. Compliance with tax laws and regulations can help avoid legal and financial consequences, including penalties and reputational damage. In a situation involving offshore tax evasion, avoidance, or enabler penalties, seeking expert guidance and support is essential. Our experienced tax advisors possess in-depth knowledge of UK tax laws and regulations and can help you navigate complex tax matters, correct any non-compliance, and ensure you remain in good standing with HMRC. Consult our tax expert for offshore tax matters to stay compliant and minimise potential risks.