Expats Could Face Criminal Charges For Tax Mistakes

Expats are at risk of unknowingly falling foul of a new criminal offence of failing to tell the UK tax man about foreign income and assets, argue tax experts.

The government wants to introduce an absolute offence of failing to declare offshore assets to HM Revenue & Customs (HMRC).

Expats who are tax resident in the UK but own property or open bank accounts overseas and fail to tell HMRC about them could face criminal prosecution under the new law.

The burden of proof would sit with the expat to show they were not trying to avoid paying tax.

HMRC does not have to proof any deliberate intention to avoid tax.

Tax experts object

The Chartered Institute of Taxation (CIOT), the professional body for tax practitioners, warns the catch-all offence could net innocent taxpayers.

The body has written to The Treasury protesting about the proposed law change and argues HMRC already has powers to deal with tax evaders and that the minimum of £5,000 tax evaded to trigger prosecution is too low.

Taxpayers found guilty of the new offence could face a fine or jail sentence of up to six months.

CIOT is concerned that someone inheriting foreign property or an offshore bank account could unknowingly break the law – and that the proposed offence has no defence for vulnerable taxpayers who fail to declare their offshore financial interests by mistake.

Crackdown on avoidance

CIOT tax policy director John Cullinane said: “Just because someone makes a mistake on their tax return without any intention of avoiding tax should not leave them open to prosecution in a criminal court with the risk of a jail sentence.

“Many taxpayers may believe they have no tax to pay in the UK if they have already paid tax on income or chargeable gains overseas, but this simple error could make them a criminal under the proposed law change.”

The strict liability tax offence is part of a wider government crackdown on offshore tax avoidance.

The plans include tougher penalties for tax avoidance offshore and sourcing more information about taxpayer’s finances under the Organisation of Economic Cooperation and Development (OECD) common reporting standard.