Increased penalties for offshore tax evasion

News: March 2011

Increased penalties for offshore tax evasion

We knew that the sanctions available to HMRC for tackling offshore non-compliance were to be increased, and we now know when and how this will happen.

Basically, the normal maximum penalty of 100% of the tax (in practice, discounted to reflect a whole set of circumstances which we argue as part of the negotiating process) will be determined by the tax transparency of the jurisdiction in which the non-compliance arises. Where the jurisdiction only exchanges information with HMRC on request, inaccuracies arising offshore will be subject to penalties of up to 150% of the tax. Where a jurisdiction shares no information from HMRC, penalties will be up to 200%.

The new penalty frameworks for offshore non-compliance will apply to income tax and capital gains tax from 6 April 2011. It categorises the source area with Category 3 being the worst. This includes Monaco, UAE, Brazil to name just a few.