Trigger for prosecution will be loss to HMRC of £25,000 a year, up from £5,000 – but experts say legislation is ‘step too far’

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.



Ministers announced the new offence as part of a plan to raise an additional £5bn from tackling tax avoidance and evasion. David Gauke, financial secretary to the Treasury, said the government was “committed to creating a tax system that is easy to understand, simple to engage with and hard to evade”.

The Chartered Institute of Taxation (CIOT) said it welcomed the government’s decision to restrict the use of the “strict liability” offence to the most serious cases but said it still had concerns that “careless mistakes” would be criminalised.



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.”

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Preshaw added that the CIOT believed as a matter of principle that it should be necessary to prove criminal intent before an individual could be convicted of tax evasion.

The CIOT has supported George Osborne’s plans to tackle tax evasion, but Preshaw said HMRC already had the power to “criminally investigate anyone with either UK or offshore untaxed funds where they can show these were deliberately not declared”.

“If they cannot show dishonesty or criminal intent, then civil penalties – up to double the amount of tax owed, in addition to the tax itself – can still be levied,” he added. “These are serious powers that HMRC should arguably be making greater use of, and we are unconvinced that this additional ‘strict liability’ offence is justified.”

David Sleight, a partner at law firm Kingsley Napley, said the proposed legislation was “a step too far”.



He added: “It is disappointing that HMRC has not taken previous strong opposition to this measure on board. Tax evasion by definition requires a deliberate act to deprive the Revenue of monies to which it is entitled. There must therefore logically be a specific intent to evade tax for the offence to be made out.”