The Guardian has reported this morning that:
Government plans to make offshore tax evasion a criminal offence even when there is no proof of intention to break the law have been softened under pressure from lawyers and tax experts.
The Treasury's draft finance bill, published on Wednesday, reveals that the trigger for prosecution will be a tax loss to HMRC of at least £25,000 a year — five times the original proposed threshold.
And as they note:
Jon Preshaw, chair of CIOT's management of taxes subcommittee, said: “This increase in the proposed threshold from £5,000 to £25,000 is in line with what CIOT called for in our representations to the government, and should ensure that in most circumstances ordinary taxpayers making unwitting mistakes are not caught up in this new offence.”
Hang on a minute! He thinks 'ordinary taxpayers' make mistakes on income of £50,000 or more a year that they happen to have offshore and think is of no interest to HMRC? What planet do these tax advisers live on when that's likely to imply more than £1 million in an offshore account right now?
I really do despair of the tax profession on occasions.
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It puts those jailings for not paying your TV license and other minor infringements into perspective doesn’t it?
“What planet do these tax advisers live in?” Obviously the same one as Lin Homer.
Amused
Example based on real-world clients:
– Own a house abroad
– Sell it
– Don’t declare the gain on UK tax return, as everyone knows that there’s no tax on houses (apart from stamp duty); and anyway, it’s not in the UK. So clearly there’s no need to declare it to HMRC.
Offshore property, UK tax due, not paid – criminal offence.
Even with a £25,000 limit you’d be caught if you make a gain of £100,000, which is not exactly a lot of money for property.
The main defence is to say that you took reasonable care when preparing your tax return, but if you missed the disposal off it altogether that doesn’t fly very well. Or if you’re lucky you’ll have paid enough foreign tax to bring the UK liability down – but this means that whether something is criminal or not depends of the overseas tax rate, which seems a bit unfair.
Nonsense
No one believes second homes are tax free
Get real and stop making excuses
Quite a few people most certainly do think all homes are tax-free. Having sold several houses without worrying about tax, they naturally consider that selling this one is tax-free too.
What do you think the Let Property Campaign is for? I’ve had a few clients come to me off the street because it didn’t even occur to them that *rent* would be taxable – until HMRC sent them an LPC letter mentioning the fact.
For most people, tax is what your employer deducts from your salary and you don’t have to worry about it otherwise.
Then they deserve to be fined then
Who says it’s a second home? Pedro, the eldest son, inherited the family home 5 years ago. He’s been travelling the world, earning money to send back to fund his kid sister through school. While he’s working in the UK, on NMW, they decide to sell the house – it’s the only asset he and his siblings have, and they figure the cash would be more use than the equity.
Why would Pedro expect there to be a UK tax liability on his overseas asset? But there would be – and now he’s a criminal to boot. That’s going to stuff up his plan to try to get a Green Card…
And Father Christmas does deliver all the prwsenfs opened on 25/12
Sorry, let’s deal with reality
One of which is that penalties are imposed with discretion
That’s the point – discretion.
The new rules are about strict liability, which significantly reduces the exercise of discretion, assuming it doesn’t eliminate it entirely.
Strict liability does not require prosecution
Not everyone who breaks a speed limit is fined even if identified – even thought they have no defence under strict liability
Discretion is still used
But the prosecution is very different when it is decided to go ahead
For heaven’s sake address what is real – and not your fiction
“One of which is that penalties are imposed with discretion”
Which is exactly what we have now.
No it is not
Go and learn some tax law and read about what is proposed
What is proposed is that failure to disclose tax on offshore income or gains is automatically treated as an offence, unless the amount is small or the person has a reasonable excuse.
Even if the sentence is light because the judge appreciates that it was accidental, you still have a conviction for fraud on your record.
The threshold amount of tax at stake is to be £25,000 in the relevant year. So you don’t need £60k or more of regular income, all you need is a one-off gain of £100k. Under the original proposals, you’d need maybe £12,000 of income or £20,000 of gains.
You cannot seriously believe that people don’t make genuine mistakes over that level of income or gains. Especially as people with relatively low levels if income, or smallish one-off gains, tend to be exactly the sort of people who don’t pay close attention to the details of tax law – as they don’t expect them to apply.
Oh come on
People who make gains of £100k overseas are few and fair between and I reall think we do have a right to think they should exercise due care
And nothing in the new law says they must be prosecuted
The vast majority still won’t be – just as large number of speeding offences, even when identified, are not
Penalties != conviction; if it’s strict liability then no matter how sympathetic the Tribunal, once HMRC decide to prosecute there’s no discretion on that bit. And have you *read* some of the cases coming out of HMRC these days? Semi-literate, bereaved epileptic housepainters being chased for unrealistic determinations; illiterate taxpayers who got HMRC to fill the forms in for them being pursued for the HMRC officer’s mistake… *Thats* reality. It’s only thanks to outfits like LITRG that they get any help at all. Sit down and read a few real life case reports please before you come up with any more sententious condescending rubbish about Father Christmas and “prwsenfs”. There need to be proper functional defences in there for real life hardship cases, so that the Tribunal judges can do the job that HMRC should have done, and your attitude isn’t helping. Just because you live, eat sleep and breathe tax doesn’t mean everyone else does. Believe it or not, it is possible to make a big mistake about tax quite innocently. Not everyone looks at a kid-fur trimmed coat and thinks “Ooh, I wonder if that’s Tibetan?”
I am aware of flaws
I am aware of the issues under-reporting has created
I am aware of unfair penalties
But let’s genral: £25,000 is no trifling sum
And you are ignoring that
“No it is not Go and learn some tax law and read about what is proposed”
It is you who is unaware of the law.
At the moment, if there is deliberation omission of income or gains in the tax return then a taxpayer can potentially be charged a penalty of up to 100% of the tax. It’s all there in Finance Act 2007.
I am aware of that
And the law is being changed
Your problem is?
In a previous response to me you denied we have a discretionary penalty regime at the moment: “no it is not”, you said.
Now I point out where the penalty regime is you say: “I am aware of that”.
You are all over the shop, Richard.
That may be because I have real problems follow9ing your flow
Because of the software I use I cannot se what you are replying to when I comment next
So, let’s be clear
We have a discretionary penalty regime
And we will still have that
But it will be easier to secure a criminal prosecution for the crime of tax evasion
I have no problem with that
As you and other commentors on this blog have noted ad infinitum – especially since the party of corporations and the feral rich came to power in 2010 – there’s one rule (very weak and flexible) for the one percent and many (punitive and inflexible) for the rest of us.
And lets just say what we know. The Treasury, as with HMRC, are entirely in the pocket of the benefactors of the Tory Party and their greed and self interest is king, ideology. They wouldn’t know how to act in the broader public interest even if they were asked to do so. That’s the extent of the cultural rot that now pervades government – and these two entities in particular. And long is it going to continue with a set of politicians in power whose reason for being there is simply to pillage, plunder and destroy.
I Live in a constituency where over 40% of those in work are on the minimum wage (or lower). £25000 is not a number that represents a possible tax bill for normal people here, it is a number that implies riches beyond the dreams of avarice. It tends to confirm that far from being “all in it together” we are them and us. Since Mr. Blair led his blue socialists into Westminster and throughout Mr Cameron’s tenure the wealth gap has grown at an ever accelerating rate.
It is a phenomena accompanied by the transfer of political, legal and economic power from the openly democratic ownership of the electorate to the covert, larcenous, sticky fingers of a self defining, self serving, elite. The norm for normal people is to be exploited and lied to.