19 August 2014
The new consultation paper issued today by HMRC, which plans to make it a criminal offence to evade offshore tax, will directly impact those investors looking to move money to non-disclosure jurisdictions. HMRC will ‘prioritise for criminal investigation’ those who move out of a jurisdiction with a disclosure agreement in place* in an attempt to escape scrutiny.
Research** by Skandia International, part of Old Mutual Wealth, has found that 38% of advisers with clients holding offshore assets say their clients are starting to prefer other non-disclosure jurisdictions for investing their money. The new proposals announced today mean that anyone taking such action, and moving money to a non-disclosure jurisdiction, will be prioritised for criminal investigation by HMRC.
HMRC have also issued a subsequent consultation paper today outlining proposals to impose tougher penalties for those evading UK tax by placing their money in a non-disclosure jurisdiction. The tougher penalty is 100% greater than if money is placed in a disclosure jurisdiction.
Investors need to think carefully about what actions they take. Moving money to a non-disclosure country could be very short sighted and will, if the proposals are introduced, have serious criminal implications, even if they did not ‘intend’ to avoid paying any tax.
Disclosing overseas assets doesn’t have to be painful. With advice from a professional, the assets can be restructured to make them efficient from a tax and reporting perspective. For example, placing the investment into an offshore bond means the investment can grow free from tax (other than withholding taxes on the underlying funds) making it a more efficient investment going forward.
The consultation period is due to close 31 October 2014.
Rachael Griffin, head of technical marketing, comments:
“Investors with undisclosed overseas assets cannot afford to stick their head in the sand. HMRC are determined to tackle overseas tax evasion, regardless of whether there is any intent to avoid tax. Moving overseas assets to non-disclosure jurisdictions just delays the inevitable, and investors need to think carefully about their actions. Taking the bull by the horns and disclosing assets doesn’t have to be that painful. With professional advice, investors can still make their assets efficient from a tax and reporting perspective.”
*Refers to the new Common Reporting Standard (CRS) agreement, which is an automatic exchange of information the UK has with 42 other countries, due to be implemented shortly. The CRS will supply HMRC with extensive information on the offshore investments of UK residents.
**Skandia International Q2 2014 adviser survey, completed by 377 financial advisers from across the globe.
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