There’s been plenty of discussion lately regarding HMRC’s efforts to tackle those businesses who avoid their full tax paying duties by exploiting offshore loopholes. The Mail on Sunday has taken a look at how HMRC is tackling an investment banking giant, and the Exchequer has revealed tough penalties for those using dodgy offshore accounting processes.
It’s been revealed that from April 6, anyone hiding money offshore could face penalties of up to 200 per cent. These penalties apply to instances where income tax and capital gains tax is avoided – critics argue that this should be extended to corporation tax liabilities.
David Gauke, Exchequer Secretary to the Treasury, bellowed: “The game is up for those going offshore to evade tax. With the risk of a penalty worth up to 200 per cent of the tax evaded, they have a great incentive to get their tax affairs in order.
“We have given HMRC an extra £900m to tackle tax cheats because we are prepared to act against the minority who refuse to pay what they owe.”
Dave Hartnett, Permanent Secretary for Tax, at HMRC also signalled an increased determination to catch avoiders: “We are serious about tackling offshore evasion. Hiding tax liabilities offshore believing that you will never be discovered is no longer a realistic hope.
“These new penalties will increase the deterrent against offshore non-compliance. They build on other activity, including signing tax information exchange agreements, requiring information about offshore bank accounts and disclosure opportunities, including the Liechtenstein Disclosure Facility (LDF).”
With attention grabbing headlines like “Big four auditors ’embedded in tax haven world’” and “Taxman eyes millions paid by JPMorgan via Guernsey”; the Mail on Sunday has also set its sights on the lucrative and murky world of offshore tax havens. While offshore loopholes are exploited by companies of varying sizes, it’s heartening to read that HMRC is willing to take on the big boys.
The JPMorgan case centres on a tax avoiding scheme used to pay bonuses. The investment banking behemoth, according to the Mail, has set up an offshore trust based in Guernsey which allows them to give staff benefits in kind, while greatly reducing income tax liabilities. It sounds very much like your average Employee Benefit Trust scheme – just the type which the Government has pledged a crackdown on. In fact, from April 6 such schemes will be forced to pay tax as you would on PAYE.
Meanwhile, the Financial Mail also shone a light on the offshore practices of the big four accountancy firms – Pricewaterhouse-Coopers, KPMG, Deloitte and Ernst & Young. According to their research they have a combined 81 offices in offshore tax havens. MP Chuka Ummuna told the paper: “There’s a whole industry out there dedicated to helping people avoid tax that will increasingly come under the microscope.” The firms defend themselves on account that they are working within the law on behalf of their clients.
Although there are question marks over the extent to which governments are willing to take on large companies (and their ability to do this), it does seem that we’re entering a new, more dynamic, phase in the battle against avoidance. Whether it will be one that produces results only time will tell.