Controversial proposals for a law to make failing to declare offshore income a criminal offence seem to have been put on the backburner by The Treasury.
Chancellor George Osborne announced the measure as part of a campaign to stamp out tax evasion as part of his Budget 2014.
However, no mention of the law is made in the draft Finance Bill 2015 published by The Treasury and no reason for the omission has been given.
This does not mean the move is dead in the water as The Treasury still has to release the results of a consultation into the proposal and another draft could be added to the bill.
Another possibility is the rules could be drafted in a second finance bill as 2015 is a general election year. The current bill would be passed before the election, but the incoming government would probably publish a new bill to enshrine any election manifesto promises in law.
Global tax evasion network
The new tax rule would make failing to disclose offshore income to HM Revenue & Customs (HMRC) a strict liability offence. This would mean anyone falling foul of the rules would automatically gain a criminal conviction and be liable to automatic fines and other penalties, including the possibility of jail time.
The measure was part of a raft of tax evasion rules introduced by the Chancellor to combat UK taxpayers failing to report income in a bid to avoid paying tax.
The move would be linked into the US Foreign Account Tax Compliance Act (FATCA) and Organisation of Economic Cooperation and Development (OECD) tax reporting networks due to come into force over the next two years.
Strict liability offence
FATCA gives HMRC and the US Internal Revenue Service (IRS) authority to swap financial information on UK taxpayers with bank accounts and investments in the USA.
The OECD network works on the same basis as FATCA, but cover s the world’s 60 or so leading economies swapping financial information on each other’s taxpayers.
Current UK tax rules demand HMRC must prove a taxpayer has income from offshore bank accounts or investments before imposing penalties.
The new law would require HMRC to show a taxpayer had offshore financial arrangements that were not included on a tax return to be guilty of the offence.
In legal terms, HMRC would not have to prove any intention to avoid tax; just that taxable income had not been notified to them.
