ENABLERS, FACILITATORS AND NON-PREVENTORS OF OFFSHORE TAX EVASION

Tackling tax evasion was a hot topic during the 2015 UK election.

Buoyed by its success at the polls and the strength of public opinion, the UK government recently announced four consultations as part of its publication: Tackling Evasion and Avoidance.

a new criminal offence for offshore evaders
civil deterrents for offshore evaders
civil sanctions for enablers of offshore evasion
a new corporate criminal offence for failure to prevent the facilitation of evasion

The last two are particularly relevant to anyone who works in or is associated with the finance industry.

The key words here are: “enabler” and “failure to prevent”.

Whilst the purpose seems clear, i.e. criminalising offshore tax evasion, HMRC in its wisdom, is sending more than a warning shot across the bows of our finance industry.

If you work in finance you will need to ask yourself if:

you could be an enabler
your organisation could be liable for failure to prevent the facilitation of evasion.

The tests are set out in the consultation documents here. http://bit.ly/1HwoUwE

Essentially, HMRC looks to criminalise

(1) those who assist or enable, and

(2) those who fail to prevent it happening.

The former generally requires intention and knowledge; the latter can be committed by omission, i.e. a failure to maintain proper systems and checks within the organisation.

The papers take the liberty of illustrating five examples of offshore evasion cases where enablers are involved tow involving the channel islands.

4: Paula (it runs across both papers). In a nutshell, the scenario is that a Guernsey lawyer in a Guernsey partnership has assisted Paula, an Australian resident in the UK since 1970, in total secrecy, to set up a network of companies meaning that Paula has never contributed to UK taxes. HMRC’s conclusion being that the lawyer in Guernsey actively and deliberately assisted Paula to evade tax and, consequently, the Guernsey partnership would be criminally liable and subject to civil penalty.
example 2: John. HMRC will have us believe that there are individuals like Michael (John’s business contact) who would take the money in a suitcase to the Channel Islands and deposit it in John’s bank account, and, more importantly, that there are banks on our Islands that accept stuffed suitcases.