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  • Tackling Offshore Tax Evasion

Tackling Offshore Tax Evasion

13 December 2016

As part of its wider strategy to increase tax transparency, HM Revenue & Customs (HMRC) is looking to target those who enable offshore tax evasion in order that HMRC is aware of offshore structures and consider which warrant investigation. 

HMRC is now consulting on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures. Should the proposal come into law, businesses that create or promote certain complex offshore financial arrangements would be required to notify HMRC of their creation, and provide a list of clients using them. The creator / promotor would subsequently be provided with a notification number to provide to their clients, who in turn would be expected to include this number on their self-assessment tax return and / or personal tax account. 

The creator of the arrangement will be responsible for establishing whether the arrangement meets the characteristics specified by HMRC and thus needs to be notified, regardless of where in the world the creator is located. If more clients use the arrangement after it is notified to HMRC, the creator will be required to provide details of those new clients. If the creator fails to notify HMRC, the responsibility then falls on any promoter of the arrangement. Should the creator or promoter fail to notify HMRC of the offshore structure, the client would still be expected to notify HMRC, as well as including the notification number on their self-assessment tax return / personal tax account. Failure to comply with these requirements would incur civil sanctions, such as penalties and public naming of the creator / promotor.

The requirement to notify is likely to apply to all structures with an offshore element that are marketed or supplied to individuals, regardless of their domicile status. At present, the proposal is not to cover corporates but this may be widened to do so in the future. HMRC are also currently looking at whether the requirement to notify should be applied retrospectively as they are concerned that structures set up to avoid the Common Reporting Standard (CRS) should be caught within these rules.