HM Revenue & Customs’ (HMRC) view is that tax evasion can manifest itself in many different forms from not declaring cash sales through to complicated structures that may also include the use of trusts or corporate vehicles. Where there is the use of false documentation, criminal investigations may take over with a view to prosecution.
To quote Denis Healy, former Chancellor to the Exchequer, “The difference between tax avoidance and tax evasion is the thickness of a prison wall”.
The Fraud Investigation Service
HMRC set up the Fraud Investigations Service on 1 April 2015. Following a further internal reorganisation within HMRC, the former Specialist Investigations team and the Criminal Investigations teams have merged under the Fraud Investigation Service (FIS).
FIS can therefore launch investigation on either a civil basis or a criminal basis as team members are drawn from both disciplines
Contractual Disclosure Facility (CDF)
Where taxpayers are offered the Contractual Disclosure Facility and the investigation is conducted under Code of Practice 9, HMRC undertakes not to pursue a criminal investigation into any tax fraud disclosed. That is on the proviso that the taxpayer makes a full and complete disclosure under the CDF.
Automatic Exchange of Information and the Common Reporting Standard
Almost 100 countries have signed up to the Automatic Exchange of Information. The Common Reporting Standard follows US FATCA.
In the USA, the Foreign Account Tax Compliance Act (FATCA) requires US persons including those living outside of the USA to file annual reports on their non US financial accounts.
It is not illegal to have offshore assets or offshore structures that may include trusts and companies with a view to protecting a family’s wealth for example. However, more and more the tax jurisdictions are wanting taxpayers to disclose their existence even if there is no suspicion of tax evasion.