Strict Liability Offence Update by Robert O'Sullivan QC

The Exchequer Secretary to the Treasury announced in HMRC’s No Safe Havens 2014 report that a new criminal offence of failing to declare taxable offshore income and gains "will" be introduced.

The new offence was to be one of strict liability and to carry a sentence of imprisonment. It was timetabled for enactment in 2015 and it was anticipated that over 1,000 prosecutions would be brought by the end of the 2014-2015 financial year.

In August 2014 HMRC issued a consultation document as to the scope of the offence. It was met with a chorus of disapproval from lawyers, including the Bar Council, and professional financial advisers. Then silence.

The offence did not feature in the Finance Bill 2015. It is worth considering the reasons for the opposition. There are no other strict liability offences in the field of direct tax. Such offences are usually reserved for technical regulatory compliance or failing to meet express demands to provide information or, occasionally, where there is an overwhelming public interest (for example, unlicensed firearms).

The State already has a number of weapons in its arsenal of offences to deploy against the dishonest tax evader, some of which carry lengthy custodial sentences. It is doubtful whether they will be deterred by a new summary only offence. On HMRC’s own figures on a sample of offshore disclosures in which civil penalties were charged, 98% involved deliberate non-compliance. That suggests there is no pressing need for a strict liability offence to catch those investors who, whether through ignorance, incompetence or negligent advice, fail to declare. Has the offence been abandoned or merely shelved until after the election?