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HMRC proposals for tackling offshore tax evasion are seriously flawed, says Kingsley Napley

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The proposed new HMRC powers to "crack down" on offshore tax evasion are seriously flawed, law firm Kingsley Napley says in its official response to the HRMC consultation exercise.

Specifically, the plan to introduce a new strict liability offence for individuals who evade tax is unclear, unworkable and ultimately unjust, Kingsley Napley says.
 
Kingsley Napley partner David Sleight (pictured), who specialises in defending both companies and individuals facing investigation and action by HMRC, says: "It is disappointing that HMRC has not taken previous strong opposition to this measure on board. Tax evasion by definition requires a deliberate act to deprive the Revenue of monies to which it is entitled. There must therefore logically be a specific intent to evade tax for the offence to be made out. As such, the basis of any prosecution should require proof of fraudulent or dishonest behaviour. The problem with what is proposed is that someone could be found guilty of committing tax fraud following a genuine mistake.
 
"No examples have been given of the kind of behaviour which would be caught by the proposals that are not already covered by offences under current tax evasion provisions. The proposed legislation is complex, confusing and is likely to create more litigation than it resolves. The lack of clarity rather defeats the purpose of the proposed legislation which was apparently designed to be simpler to administer.”
 
Whilst Kingsley Napley recognises HMRC is aware of the inherent unfairness of a strict liability offence and has thus proposed a number of defences including “reasonable excuse” and “reasonable care” for not providing accurate information regarding offshore income or assets, it feels these are currently ill-defined.
 
"It is not clear to us whether guidance will be issued or whether HMRC will simply wait for the Courts to decide," David Sleight adds. "It is our view that it would have been more appropriate to focus resources on effective enforcement under the civil regime and existing criminal measures rather than create a new offence with a series of caveats and defences."
 
In conclusion Kingsley Napley's submission says: "We understand HMRC’s policy objective in pursuing tax evaders and the political and media pressure currently being played out during party conference season. However, the proposals as they stand are unclear, unworkable and ultimately unjust.  To impose what would essentially be a reverse burden of proof in circumstances where an individual would be facing a potential custodial sentence cannot be reasonable.  Resources should not be spent on developing a new system that is inherently unfair and which defeats its very purpose."

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