Corporate report

How we tackle offshore evasion

Published 24 February 2014

HMRC is taking more action than ever before to crack down on tax cheats who evade taxes by concealing income, assets or gains offshore. As a result, we have already collected more than £1 billion in additional revenue from our disclosure facilities. This briefing explains how we are reducing the opportunities for offshore tax evasion, what we are doing to identify and catch evaders, and raises awareness of the tough consequences for those who evade their taxes.

Our offshore disclosure webpage has more information about how to come forward.

See what we are doing to tackle offshore evasion.

1. What is offshore evasion?

Offshore evasion is using a location outside the UK to deliberately, and illegally, evade UK tax. This includes:

• moving UK gains, income or assets offshore to conceal them from HMRC
• not declaring taxable income or gains that arise overseas, or taxable assets kept overseas
• using complex offshore arrangements to hide assets, income or gains

2. Why it matters

Most individuals and businesses are honest and pay the tax that they owe when it is due. But a small minority try to evade their taxes by hiding money and assets offshore. Offshore evasion is illegal and harmful. It is unfair that those who can afford to use expensive offshore banks and complex financial structures can evade their responsibility to pay the taxes that fund vital public services. That is why we are stepping up our campaign, working tirelessly to make sure there are no safe havens for offshore tax evaders.

3. What we are doing in the UK

The UK made huge progress, during its presidency of the G8 group of leading economies, in its efforts to introduce greater levels of tax transparency. They fully endorse the new global standard for automatic exchange of information, which has just been agreed by the Organisation for Economic Cooperation and Development (OECD), with more than 40 countries signed up to early implementation, as well as commitments to greater transparency of ownership of companies.

HMRC’s offshore evasion strategy, No safe havens, was first published at Budget 2013 and set out our tough approach to offshore evaders, which has led to:

• collecting more than £1 billion in additional tax, penalties and interest from more than 56,000 people who came forward via our disclosure facilities
• introducing tougher sanctions – including penalties of up to 200 per cent of the tax that was evaded, criminal investigations and prosecutions and publishing the names of deliberate defaulters
• consulting on enhanced penalties for offshore evasion at Budget 2014
• exploiting information given to us from a range of third parties, including a ‘test and learn’ on data received under the EU Savings Directive, in readiness for more information from new automatic exchange of information agreements in 2016
• investing £3 million a year to develop new approaches to offshore tax evasion
• investing in 2,500 extra staff, dedicated specialist teams and cutting-edge technology to detect and reduce avoidance and evasion. Our high-tech data analysis system, Connect, has already made four billion connections across customer tax records and from information via numerous other sources to identify areas where tax collection is at risk

4. What we are doing internationally

The UK is working with other countries to reduce the opportunity for tax evasion and gain access to new information that helps us identify and pursue those who evade tax.

The UK is:

• one of the key drivers behind the new global standard for automatic exchange of information which has recently been agreed by the OECD
• part of a network of 137 treaties with other countries allowing for exchange of information about taxpayers
• expecting to recover around £1 billion in revenue over the next six years, by exchanging information with Crown Dependencies such as Jersey, Guernsey and the Isle of Man, as well as from their disclosure facilities. It is still early days, but thousands of people have contacted us already about these disclosure facilities
• recovering tax from people using the Liechtenstein Disclosure Facility, by offering people with offshore accounts or assets the chance to settle their tax liabilities; these facilities close in 2016
• clearing up past tax evasion issues and keeping up the pressure to make sure there are automatic exchanges of information with other tax authorities
• collecting unpaid tax, under an agreement with Switzerland, which came into force in January 2013
• deciphering large amounts of data on secret offshore business structures, in a joint operation with the Australian Taxation Office and the US Internal Revenue Service
• increasing our understanding of why and how taxpayers evade offshore
• expanding our international network of Fiscal Crime Liaison Officers to work with financial, customs and law enforcement organisations abroad

Our message to offshore evaders is clear:

Are you hiding any undeclared income offshore? New international agreements will let us see more information about your overseas accounts, so the net is closing in on you. If you’ve declared all your income then you have nothing to worry about. But if you haven’t and we catch you, you will have to pay your undeclared tax, a penalty of up to double the tax you owe and you could even go to prison.

People with taxable income in offshore accounts have the opportunity to come forward via our disclosure facilities before they close in 2016. We are urging them to do so and take advantage of these facilities before it is too late.