Tougher UK laws regarding tax evasion came into force at the start of 2017.

The UK's tax authority, HM Revenue & Customs, has been given tougher powers to go after alleged tax evaders and those it thinks are assisting them, as new laws came into effect from the start of 2017. 

The new powers mean that any individuals or corporations taking deliberate action to help others evade paying tax face fines of up to 100 per cent of the tax they helped evade, or £3,000 ($3,662), whichever is highest. The tax authority will also be able to publicly name the enabler.

Though tax evasion has always been illegal, this law means Her Majesty’s Revenue & Customs can, for the first time, charge civil penalties on the facilitators of the tax evasion.

The government’s new powers were unveiled by George Osborne, former finance minister, in the 2015 budget. HMRC also published a consultation in August 2016, promising such penalties.

There is controversy about moves to make tax evasion what is called a strict liability offence in which it is no longer necessary to prove intent to break the law; practitioners say this exposes tax advisors and others to serious risk. (See an example of the discussion here.)

“The raft of measures we have introduced to tackle avoidance and evasion will create a level playing field for the vast majority of people and businesses who play fair and pay what is due,” said Jane Ellison, financial secretary to the Treasury.

A new corporate criminal offence, currently being legislated, is also being introduced by the government this year. Companies will be held liable if an individual acting on its behalf as an employee or contractor facilitates tax evasion. Previously there needed to be proof that the board of directors were aware and involved in facilitating the evasion.

Further action due in coming months also includes a new requirement to declare and correct historic tax evasion, and a consultation on a new requirement to notify HMRC of complex offshore financial arrangements that bear the hallmarks of enabling tax evasion.

The Treasury says that, since 2010, it has secured more than £2.5 billion ($3.07 billion) specifically from offshore tax evaders. It has also secured over £130 billion in additional compliance revenues as a result of actions to tackle tax evasion, tax avoidance, and non-compliance.

Dawn Register, a partner at BDO, said of the new HMRC powers: “This announcement, right at the start of the New Year, further highlights the pressure that is continuing to mount around cracking down on tax evasion and avoidance, especially in the build-up to April 2017, where we will see the commencement of the serial avoiders special regime. Most tax professionals have already seen a change in appetite for ‘highly artificial’ tax schemes with many taxpayers being conscious of HMRC’s actions in this area.”

The “requirement to correct” measure, Register added, will be significant in its impact. “This is going to shine a spotlight on individuals with any offshore related tax matters, to check and double check that their UK filings are accurate. Advisors are also going to feel under pressure to ensure there are no technical mistakes. We expect this will lead to an increase in voluntary disclosures prior to the deadline of 30 September 2018. By making this a legal requirement, HMRC is really giving teeth to the message that people who do not get their tax affairs in order will face severe consequences.”

“We welcome the new penalties for tax advisers, accountants and lawyers cooperating with tax evasion builds upon all the other efforts the British Government, fuelled by mounting international pressure, is doing to fight international tax evasion,” León Fernando del Canto, managing partner at Del Canto Chambers, said. 

“There is still work to be done in the way of standardising the ethical rules of the tax advisers in general and international tax advisors in particular to be universally recognised. The profession is very loosely regulated internationally and apart from the UK there are only a few professional organisations for international tax advisers, all of them with different criteria for admission, CPDs and ethics. Therefore, a universal code of ethics and professional standards should be agreed to regulate the international tax advisory profession worldwide together with international criminal rules to be applied as it is done in the UK,” del Canto added. 

To see commentary about the issue of strict liability and tax evasion, click here.