UK: The End Is Nigh...

The recent Budget and the documents released alongside it indicate a sharp escalation in HMRC's 'war' on offshore tax evasion.

The tightening of the ratchet

The scariest of three new measures is the proposed introduction of a 'strict liability' criminal offence for offshore evasion. Strict liability means that if you have undeclared liabilities relating to an offshore account you are, by definition, guilty – the absence of any intention to evade tax will no longer be a defence.

Not so scary, but still alarming if you have an undisclosed account, is the confirmation that more than 90 countries worldwide – including the best known "tax havens" - have now committed to the automatic exchange of taxpayer information by 2018. HMRC estimate that they will receive information including names, addresses, account numbers and balances on up to two million UK taxpayers with offshore accounts. They also anticipate that they will be able to look through trusts and shell companies to identify beneficial owners.

If your response to such threats is a decision to 'come clean', you will find that the options for doing so are to be sharply curtailed. The LDF (the only disclosure route that offers immunity from prosecution) and the Crown Dependencies disclosure facilities will be brought to an early close at the end of 2015. In their place will be a new disclosure facility expected to run to mid-2017. Full details have yet to be announced, but penalties will be higher and there will be no guarantee that criminal prosecutions will not be pursued. This new disclosure facility is being billed as the last chance to disclose before HMRC start to automatically receive information in respect of offshore accounts.

Proceed with caution

It is not illegal to hold an offshore account and it will not become illegal under the measures now announced. However, if you hold such an account you will have to be very careful that you either make full and timely disclosure of income and gains via your tax returns or, if you consider yourself not domiciled in the UK and you wish to take advantage of the remittance basis of taxation, that you are confident as to your status and that you make the appropriate claims. Accidental failure to disclose will not be an excuse.

To anyone who has not previously made full disclosure of income and gains associated with an offshore account, the message from HMRC is clear: disclose now – you have been warned!

For another six months the LDF will remain the best option for disclosures of any real size. If you miss this chance, you should accept that criminal prosecution and even imprisonment is a very real possibility.

UHY Hacker Young's award winning*, specialist tax investigations team has been dealing with disclosures under the LDF since its launch in 2009. If you think you might need to disclose, talk to your usual UHY adviser about the process and about the excellent results that we have achieved for those who have gone down this route before you.