Despite warnings, the government will go ahead with plans to consult on legislation that will create a new criminal offence for corporations that fail to take appropriate steps to prevent the facilitation of tax avoidance.
Pinsent Masons, the law firm, notes that the new law will be difficult to impose against overseas firms. Jason Collins, partner and head of tax at Pinsent Masons, is quoted by economia warning of the dangers of trial by press release:
“You can’t extradite a company.The government has also published further details on new powers that will allow HMRC to levy penalties on companies that persistently engage in aggressive tax planning.
HMRC may resort to 'prosecution by press release' – i.e., by issuing criminal proceedings which, because they are in the public domain, will mean the foreign company has to decide whether to respond in the public domain.
This is the sort of legislation of which US law-makers would be proud. It is a bold attempt by the UK to extend the arm of its law beyond its borders. It needs to be matched with resources to police the offence otherwise it will become a damp squib.”
A large business can be placed under what HMRC describes as “special measures” if it judges it to have an ongoing history of tax planning. HMRC’s “special measures” could then be used to impose harsher penalties if any unpaid tax is due to a “speculative interpretation” of UK law.
Pinsent Masons are of the view that HMRC is free to decide what this “speculative interpretation” is. Heather Self, partner at Pinsent Masons said:
“The new terms effectively leave HMRC as judge, jury and executioner on these businesses’ approach to tax.Handing more powers to HMRC, given its track record of mistakes and abusing its current powers, is not step in the right direction.
That is a very subjective judgement and is likely to result in some very contentious penalties when it is used.”
Tax does have to be taxing.
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