UK tax initiatives to combat tax evasion and avoidance
Thursday 26 October 2017
By Monica Dixie, Senior Tax Consultant, Equiom Solutions
As HMRC implements its ‘No Safe Havens’ policy, it is increasingly issuing legislation which has an extra-territorial reach. Below is an outline of the new legislation, details of who is affected and what businesses need to do.
Corporate criminal offence
Who is this relevant to? Any non-UK company or partnership doing business with any person who is, or should be, a UK taxpayer or with an associated person acting on their behalf while present in the UK.
Outline of HMRC initiative: This applies from 30 September 2017 where any (i.e. UK or non-UK) company or partnership has failed to prevent evasion of UK taxes or when a UK company or partnership (or non-UK company or partnership with a UK taxable presence or an associated person acting on their behalf in the UK) fails to prevent evasion of non-UK taxes.
Impact on non-UK businesses:
- Where any non-UK company or partnership has a member of staff, an agent or any other associated person who knowingly facilitates tax evasion, that entity could be held criminally liable, suffer penalties and incur reputational damage
- The scope of who is an associated person is quite wide and, therefore, the impact of this legislation should be considered in light of a number of relationships
- There is a defence from this offence if the business has reasonable procedures in place to prevent the facilitation of tax evasion by an associated person
How Equiom Solutions can help: We are able to assist with identifying how to respond to this legislation by working with those within the business to identify risk areas, review procedures and contracts and provide training to the top-level governance team and staff, as required. We recommend changes proportionate to the risks and the business undertaken to enhance the existing procedures to minimise the risk of facilitation of tax evasion.
Requirement to correct
Who is this relevant to? Trustees of non-UK trusts, non-UK companies (e.g. non-resident landlords) and non-UK resident individuals who have failed to declare or under-declared:
- UK income tax (e.g. UK rental income, dividend income or income on any other asset);
- UK capital gains tax (e.g. disposed of UK residential property since 5 April 2015); and
- UK inheritance tax (e.g. for a trust on a 10 year anniversary or in some cases where capital leaves a trust); this is applicable to trustees and individuals only
Outline of HMRC initiative: This will come into effect retrospectively from 5 April 2017 if the existing draft legislation is enacted. It requires taxpayers to rectify historic tax errors relating to offshore interests in respect of income tax, capital gains tax and inheritance tax. The deadline for correction is 30 September 2018 if punitive tax-based penalties (up to 200% of the tax liability) and asset-based penalties (up to 10% of the value of the asset involved) are to be avoided. As HMRC will be receiving additional information from UK FATCA and CRS from other tax authorities, they are providing an opportunity for declaration of underpaid tax to be made prior to receiving and processing this information.
How Equiom Solutions can help: We have expertise in UK taxes relevant to non-UK persons and can provide a review of whether UK tax liabilities have been appropriately calculated. Where there have been errors in tax returns or notification of tax liabilities have not been made to HMRC, we can assist with resolving the position.
UK register of beneficial ownership for Trusts
Who is this relevant to? Trustees of non-UK and UK trusts which have a UK tax liability. A UK tax liability in this case includes income tax, capital gains tax, inheritance tax (e.g. on a 10 year anniversary or in some cases where capital leaves a trust), stamp duty land tax, land and buildings transaction tax or stamp duty reserve tax.
Outline of HMRC initiative: This legislation is effective from 26 June 2017 and requires trustees to register trusts and provide a large amount of information regarding the ‘beneficial owners’ of the trust to HMRC on a year by year basis. The deadlines for registration in this first year after introduction of the legislation is the earlier of:
- 5 December 2017 if 2016/17 is the first year in which a UK income tax or capital gains tax liability arises for the trust; or
- 31 January 2018 if a trust has had a UK tax liability other than income tax or capital gains tax in 2016/17
Beneficial owners include:
- Beneficiaries, including those defined as a class in the trust deed
- Other persons with control of influence over the trust, including Protectors (control is defined quite widely)
Information regarding potential beneficiaries is also required, which includes those named in a letter of wishes or similar communications from a settlor, even if they are not named as beneficiaries in the trust deed.
Generally, the information required to be provided for each individual includes the name, date of birth, national insurance number or Unique Taxpayer Reference (if neither is available, the address and, if the address is outside the UK, the passport/ID information along with country of issue and expiry date). For some beneficial owners, more information may be required.
How Equiom Solutions can help: Assistance with identifying whether trusts have UK tax liabilities, assistance with training for staff on the new registration services, assistance with identifying what additional information to include in systems, assistance with reviewing procedures to identify how to incorporate information gathering and reporting into existing procedures.
For more information about this topic, please contact Monica Dixie.