12 Apr 2014

Taxing issue: jail threat for overseas tax evaders

Chancellor George Osborne is talking tough on tax evasion – again – this time threatening that those who avoid tax by hiding their money overseas could face prison. But will it work?

Jail threat for overseas tax evaders (Getty)

Speaking from the International Monetary Fund meeting in Washington, George Osborne told the Financial Times: “It is totally unacceptable for people not to pay the tax that is due and the message will be clear now with this new criminal offence that if you’re evading tax offshore, there is no safe haven.

“We are changing the balance of the law so the burden of proof falls on those who are hiding their money offshore and we don’t have to prove that they intended to do so.”

It’s the latest bit of tough talk from the chancellor on an issue which the coalition government has long been attempting to tackle. But so far efforts have fallen short: at the end of last year it was revealed that HM Revenue and Customs (HMRC) had only recouped a few hundred million pounds in unpaid taxes from UK holders of Swiss bank accounts, despite claims that the move could raise more than £3bn.

If you’re evading tax offshore, there is no safe haven. Chancellor George Osborne

But the government hopes that new regulations could change all that. The plan is to bring in a new criminal offence, making it much easier to prosecute British citizens who hold undisclosed money in offshore accounts.

Power to prosecute

The changes would give HMRC the power to prosecute people who do not declare their foreign income, even if they did not deliberately intend to avoid tax.

The new legislation would be a move away from current laws, which demand that prosecutors show that individuals intended to avoid paying tax on foreign income.

A document set to be published on Monday will outline the details, with the new sanctions due to come in by next year – although critics warned it was too blunt an instrument.

Filthy rich: the truth about tax havens 

Bill Dowdell, head of tax at Deloitte, told The Times: “It’s horrifying. People should not be put in prison unless you can prove intent. I’m shocked to find that an offence which could lead to a prison sentence could be decided on a strict-liability basis. If this change applies to all evasion cases I think that’s unacceptable. People should not be put in prison unless you can prove intent.”

The Treasury said prosecutors would still be able to exercise some discretion.