No safe havens 2019 – offshore compliance matters

    Since 2010, HMRC have raised an additional £2.9 billion through its focus on offshore non-compliance, through initiatives including 6 separate disclosure facilities, a deal with Switzerland and the introduction of a series of legislative measures, giving HMRC increased powers to assess older liabilities, charge higher behaviour-related penalties and also to mount criminal prosecutions for the facilitation of tax evasion. 

    HMRC’s success has also been boosted by a number of information sharing agreements with offshore jurisdictions and the Common Reporting Standard, a global information sharing project involving over 100 jurisdictions, initiated by the UK during its presidency of the G8 in 2013.  
     
    HMRC’s stated objectives have changed since the 2014 No Safe Havens document and are now:
     
    • to maximise revenues and bear down on avoidance and evasion
    • transform tax and payments for customers
    • design and deliver a professional, efficient and engaged organisation
     
    They intend to achieve this through:
     
    • leading internationally
    • assisting compliance
    • responding appropriately
     
    Leading internationally
     
    HMRC’s international focus is suggestive of a better grasp of the connections within the offshore tax environment, presumably informed by its experience over the past 10 years or so.
     
    HMRC has also brought the OECD-driven Base Erosion and Profit Shifting (BEPS) and the Diverted Profits Tax (DPT) under the offshore strategy umbrella. 
     
    One particular area HMRC are focussing on is levelling the playing field on obtaining data held overseas, especially by online platforms.  
     
    Another area of focus is working with other jurisdictions to obtain data in addition to that obtained through CRS.
     
    HMRC are working to obtain information about the beneficial ownership of legal entities and arrangements as beneficial ownership transparency is seen as playing a central role in ensuring tax compliance.
     
    The UK is also a member of 2 new international partnerships, including the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), a network of 40 jurisdictions and Joint Chiefs of Global Tax Enforcement (known as ‘J5’). These organisations complement HMRC’s collaboration with other UK government law enforcement agencies, including the police, the National Crime Agency and the Border Force, as well as regulators, such as the Financial Conduct Authority. There is also focus on helping developing nations with their own internal tax compliance to help reduce the opportunity for offshore evasion. 
     
    Assisting compliance 
     
    HMRC have committed to invest £1.3 billion to become the most digitally advanced tax authority in the world, they have set out their intention to work with the tax profession and relevant professional bodies to improve the quality of compliance. 
     
    Responding appropriately
     
    HMRC have committed to using the full extent of its civil and criminal powers to investigate fraud and tackle financial crime. 
     
    This means challenging avoidance schemes in the courts, the continued use of APNs, civil and criminal investigations of tax fraud, resulting in severe financial penalties or criminal sentences for tax payers and those who enable them.

    As a result of these efforts, the tax-gap is almost at an all-time low – 5.7% for the 2016/17 tax year per the Measuring Tax Gaps 2018 publication. 

    HMRC claim to have ‘secured and protected’ over £200 billion through these initiatives.

    The remit of No Safe Havens is broad, so in theory anyone with offshore financial connections is impacted, but in the short term it will be those whose data HMRC already has:

    HMRC intends to collect additional yield through use of foreign data gathered in relation to 3 million UK residents holding 5.67m accounts. 

    Tens of thousands of taxpayers have already been written to following the recent receipt of offshore information; some may have made disclosures, but others may not.

    HMRC’s focus is on opening enquiries, to continue to deal with these 3 million taxpayers, so significant activity is expected in this area.