Chancellor George Osborne wants to make stashing cash in secret bank accounts and investments offshore a crime for British taxpayers.
In a legal U-turn, proposals for a new law shift the balance of proof from HM Revenue & Customs (HMRC) to the taxpayer.
So, instead of the tax authority having to prove someone has offshore money to avoid tax, the new law would mean HMRC only has to show someone has undeclared assets overseas to secure a conviction.
The new law also seeks to hike existing tax penalties on undeclared interest and gains from the current twice the tax owed.
The proposal is outlined in a new consultation issued by the Treasury, and includes measures to increase penalties for taxpayers who move their cash around offshore financial centres to try to avoid detection by HMRC.
Rewards for whistle-blowers
However, the Treasury clarified how the new law will work.
A spokesman explained judges could exercise discretion if they considered someone was ignorant of the law. The new laws also only apply to income generated offshore, rather than that earned in Britain and then sent overseas.
Another proposal seeks to offer cash incentives to whistle-blowers who give information to HMRC about offshore tax avoidance.
Announcing the consultation, Osborne said: “The British government is at the forefront of stamping out tax avoidance by hiding money offshore. We have made significant steps to share tax information with other countries and to make banking and investment more transparent to stop people hiding money.
“HMRC has raised an extra £1.5 billion in the past two years from tracking down undeclared assets offshore.
No safe havens
“This is not the end of our fight against tax avoidance, but just another step in our pursuit of those who try to avoid paying the tax that is due on their wealth. There are no safe havens offshore and those who believe they can get away without paying the right amount of tax have a big shock coming.”
The British government has automatic tax information pacts with offshore financial centres like the Isle of Man, Jersey, Guernsey, the Caymans and British Virgin Islands.
Britain was also the first nation to sign up to the American Foreign Account Tax Compliance Act (FATCA), which has more than 50 nations in a tax information sharing network.
Draft proposals are also with the Organisation for Economic Co-operation and Development (OECD) to extend the network to more countries by the end of 2015.
