The Government will make it a criminal offence for
corporations to fail to take adequate steps to prevent evasion,
as well as a tougher penalty regime for those that are seen to
be enabling it.
Collins, partner at Pinsent Masons, said: "HMRC has
thankfully rowed back on the unworkable aspects of the
definition of 'agent’. Gone is liability for
the acts of the staff of an intermediary."
The Treasury’s draft legislation, named 'Tackling offshore tax
evasion’, was published on December 9. One
welcome move is that the draft legislation has elevated the
threshold for prosecution under the new strict liability
offence, meaning its use will be limited to cases where the
underpaid tax is £25,000 ($38,000) a year. The previously
touted threshold was £5,000.
The legislation covers third parties providing services to a
client of the organisation if the third party has an "element
of control" over the provision of services.
Ministers have been pressured to throw support behind new
anti-avoidance and anti-evasion measures such as this.
Danny Alexander, the former chief secretary to the Treasury,
was a strong advocate for the push to apply stricter liability
in the form of a criminal offence. Offenders may serve a six
"We’re making it a crime if companies fail to
put in place measures to stop economic crime happening in their
organisations," said Alexander when the new regime was
introduced in March. "Tax evasion is a crime like any other. If
people help a burglar, they are accomplices and criminals too.
Now it will be the same for those that help tax evaders."
The consultations for the draft proposal began in July with
further discussions planned for early 2016.
HMRC said in the report that it is "mindful of the need not
to overburden corporations by requiring them to put in place
procedures that are not proportionate to the risk posed by
Jon Preshaw, chairman of the Chartered Institute of
Taxation, points out that HMRC already has the power to
criminally investigate anyone with either UK or offshore
untaxed funds in the case that they can show these were
deliberately not declared.
"These are serious powers which HMRC should arguably be
making greater use of, and we are unconvinced that this
additional 'strict liability’ offence is
justified," said Preshaw.
National Audit Office evaluation report on
A report by the National Audit Office, was released on
December 16, has found that losses to tax fraud amount to
£16 billion each year.
Further reports are expected to follow that will evaluate
the effectiveness of how HMRC deals with different aspects of
"HMRC clearly needs to think harder about how it tackles
tax evasion, the hidden economy and criminal attacks," said
Meg Hillier, MP and chair of the committee of public
accounts, "The Committee will be examining
HMRC’s work in this area throughout this
It was reported that in 2014/2015 HMRC collected
£26.6 billion in additional revenue from all its
efforts in achieving better compliance.
"Time and time again we hear that government departments
don’t have the data or information that they
need to plan or evaluate their activities properly, despite
them being responsible for setting up these projects or
programs in the first place," said Hillier.
"HMRC is no different in this respect. HMRC needs to use
the powers and sanctions it has to make a public example of
those who break the rules."
Public mandate for changes
The 2015 survey on the ethical behaviour of British
business, published by the Institute of Business Ethics (IBE),
has found that tax avoidance remains the top issue the British
public thinks business needs to address.
Philippa Foster Back, IBE’s director, said:
"The fact that tax still remains the top public concern is an
example where business is not doing enough to address these
"Internal engagement is needed around the decisions and
circumstances behind tax positions, then communicated
externally," he added.
Tax avoidance has been one of the top two issues since it
was first introduced as a category in the survey in 2012, with
34% considering this an issue which needs to be addressed.