HMRC aim to double their money as they increase the penalty for tax dodging to 200% of the unpaid sum, the government have announced in their pre-Budget report.
With up to a whopping £5 billion lost every year through tax evasion the government is deadly serious about recouping its money and this fine increase is part of 14 new methods that are being implemented to cut this colossal loss. With the current fine standing at 100% this double increase will severely hit the pockets of prospective tax dodgers.
To detail the loss that tax evasion can amount to, HMRC revealed that in the year 2007-08 it saw an estimated £40billion disappear into the pockets of evaders. In the report the government stated: “Legislation will be brought forward to ensure that those who fail to declare offshore tax liabilities will face the tough penalties attracted by deliberate tax evasion.” They also explained that they need to be notified if one opens offshore accounts in certain locations “There will also be a new requirement to notify HMRC when opening offshore bank accounts in certain jurisdictions, supported by a separate penalty regime.”
The report added: “Evading tax offshore could therefore result in combined penalties of up to 200% of the unpaid tax”
HMRC is also pushing its disclosure opportunity scheme which allows people who have money guarded by the secretive veil of offshore bank accounts the chance to declare these hidden sums of cash and pay but a 10% penalty. A similar scheme was utilised in 2007 and HMRC found that many evaders coughed up the unpaid tax to avoid the much harsher fines that would have followed. The head of UK tax investigations at KPMG accountants Paul Harrison, foresees a similar flurry of swift payments. He told the BBC news that he expects his phone to be “red hot” with clients who wish to come clean.
The 200% penalty will be pushed through via this year’s budget and will be effective from 2011. The fine will be determined on two factors, one half for not declaring the money and the other half determined by whether the evasion was deliberate or not.