By Max Clarke
HM Revenue and Customs (HMRC) have announced that they will begin levying penalties of up to 200% for perceived tax evasion from this April in a bid to crack down on overseas tax avoidance.
Members of the UK200Group of independent accountancy and lawyer firms have commented on the HMRC's decision:
Alan Boby, Tax Partner, Ellacotts LLP:
“The threat of higher penalties will definitely act as a more effective deterrent to tax evaders. There have been a number of amnesties for people who come clean and the recent Liechtenstein Disclosure Facility has been far more successful than HM Revenue and Customs (HMRC) had expected. There are fewer places to hide and apparently HM Government is now talking to a number of Caribbean tax haven countries about reporting information.
“Honest taxpayers expect the Government and HMRC to nail tax evaders, but there is still the indefinable category of ‘immoral tax avoidance’. Surely the test should be whether a tax avoidance strategy is legal or not? The idea that taxpayers should all act within the ‘spirit’ of the law is presumably be based on the premise that tax loopholes exist purely by accident, whereas the spirit of the law often supports tax avoidance rather than encourages us to pay tax voluntarily. If all laws were based upon the moral test I assume there would be no need for speed cameras!
“Finally, what about the taxpayers who just do not report their income and gains on time? It seems that about one million UK taxpayers missed the tax return filing deadline in 2010, so it will be interesting to hear how many failed this year. HMRC has now issued proposals for additional late filing penalties to start on 6 April 2011. These new penalties will crank up the pressure on those who just can’t be bothered, but HMRC need to make sure that they help all taxpayers to get it right first time! Perhaps it is time for them to drop their oxymoron ‘Tax doesn’t have to be taxing’!”
Cormac Marum, partner, Harwood Hutton:
“Deliberate tax evasion is a criminal offence and we should have no truck with it, so 200 per cent penalties are a good idea for such criminals. But these criminals deliberately falsify and conceal their tax position or deliberately fail to disclose — hiking the penalty rates is unlikely to persuade such people to play the game honestly.
“Although the new 200 per cent penalty rate is restricted to those who deliberately conceal income or gains in the worst tax haven countries, the new rules also charge higher penalties for more minor offences committed in relation to funds held in most overseas countries. Higher penalties should encourage such taxpayers to re-check that they have not forgotten about long lost overseas bank accounts.
“But the most effective action for HMRC to take would be to dramatically increase the chances of people getting caught for hiding money overseas.”
Jonathan Russell, partner, ReesRussell:
“Some of the amnesties have brought in increased compliance and disclosure but there almost certainly is still a lot still to be discovered. The prospect of much higher penalties may, if linked with further amnesties, generate further disclosure. Such amnesties are valuable as the cost of discovery is removed and future on going tax can be collected. Investigations are expensive and the increased penalties will ensure a greater payback.”
David Ingall, partner, JWPCreers:
“The levels of penalties mentioned are for those who have undeclared overseas accounts. There have been a number of amnesties declared for taxpayers in this area so it is not surprising that HMRC are making a final push for voluntary disclosures. Whether there is a moral case for a 200 per cent penalty is a separate issue.”