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Offshore tax evasion: offences relating to offshore income

HMRC have recently released guidance on the new criminal offences introduced by Section 166 Finance Act 2016 relating to offshore income, assets, activities and what a UK taxpayer’s responsibilities are. We have summarised the key points below, and further information can be found at:

https://www.gov.uk/guidance/offshore-tax-evasion-offences-relating-to-offshore-income

For the tax year ended 5 April 2018 and future tax years, if a UK taxpayer fails to declare offshore income or gains that results in tax due, they will be committing a criminal offence if they:

• fail to notify HMRC of their chargeability to income tax or capital gains tax
• are required to deliver a tax return and fail to do so
• provide a return which contains an inaccuracy

For the criminal offence to apply the additional tax must exceed a threshold amount which is currently set at £25,000 and be in respect of offshore income, assets or activities.

A UK taxpayer will have a defence to these criminal offences if they have a ‘reasonable excuse’ for failing to notify HMRC or for failing to deliver the tax return, or if they took ‘reasonable care’ to ensure that the return was correct and complete.

A conviction for any of these offences can lead to a custodial sentence for up to 6 months and, an unlimited fine in England and Wales, or a fine not exceeding £5,000 in Scotland and Northern Ireland.

It is important that UK tax resident individuals (UK domiciled and non-UK domiciled) carefully consider their UK tax obligations. The tax rules have changed drastically in recent years and there is always a risk that individuals are relying on outdated tax advice. UK residents with non-UK income, assets or activities need to review their tax position carefully to ensure they do not fall foul of these new offences.

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