Making tax evasion a strict liability offence is arguably an assault on important long-standing legal principles. But private client advisors and customers cannot ignore the changed landscape, and must plan accordingly.

The move by the UK government to make tax evasion a strict liability offence, relieving enforcement bodies of having to prove intent to evade tax, raises a number of questions, not least worries about whether respect for due process of law, already arguably under pressure in the UK and elsewhere, is dangerously compromised. The reason for the "intent" part of such cases is precisely so that people who innocently fall foul of laws do not get unjustly treated. One suspects that in its desire to raise as much revenue as possible and react to public concerns about "fat cats" cheating the taxman, the current government is allowing important principles of jurispudence to be compromised. (See more comment here.)

In any event, this is the position in which private client advisors and their clients find themselves. In this article, Iain Donaldson, partner in the wealth management team, and Alastair Long, associate in the aviation team, at Hill Dickinson, discuss the issues. The views are those of the authors and not necessarily shared by this publication but the editors are delighted to receive such expert insights and invite readers to respond.

The strict liability regime contained in the draft Finance Bill 2016, currently working its way through parliament, is a clear statement of the UK government’s intent to tackle tax evasion. This intent naturally rides on the wave of growing popular anger against the opacity of the tax affairs of some very wealthy people. However, given the complex nature of tax liability and the sheer volume of UK tax regulation, the decision to include statutory provisions that potentially expose those who never intended to commit tax evasion to automatic criminal sanctions is troubling. This is especially so when the country’s distinctly multinational taxpaying population, with income and assets both in the UK and abroad, potentially becomes a much larger pool of accidental evaders that Her Majesty’s Revenue and Customs might investigate.

Before the recent Panama Papers data leak even sparked renewed worldwide scorn, indignation and anger against tax havens and offshore dealings generally, HMRC had begun to close various existing disclosure facilities, including the Liechtenstein Disclosure Facility and the Crown Dependencies Disclosure Facility. These enabled UK taxpayers to correct any irregularities in their fiscal declarations pertaining to overseas income and gains without facing the sort of civil and criminal sanctions that they would otherwise have done had they not submitted and/or corrected their returns.

To replace those previous facilities, HMRC launched the Worldwide Disclosure Facility on 5 September 2016. The new facility will run until 30 September 2018 during which time HMRC wants people to undertake the "requirement to correct" their declarations voluntarily before tougher sanctions for a "failure to correct" take effect as a result of the legislative changes that the Finance Bill 2016 will introduce. The WDF offers no special terms or amnesty so it raises the interesting point of whether deliberate tax evaders will voluntarily step forward or continue to run the risk and simply ignore the WDF. The UK government’s uncompromising approach is a symptom of developing public appetite to punish tax evasion as the scourge of civilised society against the backdrop of a moral crusade against legal tax avoidance schemes and offshoring.

Not everyone is a Leona Helmsley or an Al Capone though. Whilst HMRC have repeatedly stated in their consultation documents that it is the most serious cases which will merit criminal investigation and prosecution, all UK taxpayers who fail to declare any offshore income and gains to which they are beneficiaries will be strictly liable. That they did not have any intention to do so will be de-facto irrelevant, although they may be able to rely on the defence of having a reasonable excuse or having taken reasonable care so as not to have made a submission mistake.

Fortunately, the threshold of £25,000 of tax liability owed per chargeable year is higher than the £5,000 originally proposed. However, we also live in a world where, as many genealogists would confirm, there are a great many people who are not aware of being beneficiaries. Similarly, for example, a failure by offshore trustees to communicate promptly the extent of a benefit could result in non-disclosure. The reasonable excuse defence may well apply in those cases, but HMRC’s historic appetite for challenging reasonable excuses in court, coupled with being relieved from the burden of proving intent to evade, could potentially mean an uncomfortable experience at the local magistrates’ court for the unwitting and accidental offender who may face fines and up to a year in prison if their reasonable excuse argument is rejected.

Ignorantia juris non excusat or – ignorance of the law is no excuse – is not a fair legal maxim in any and all circumstances. It is conceptually difficult to become an accidental fraudster.

Arguably, given the limited resources available to the UK’s tax authority, HMRC will not want to waste time vigorously pursuing simple strict liability offences in the wake of wider public revelations about offshore activities and schemes belonging to multinational corporates and the uber-rich. However, prosecuting strict liability offences may be more attractive to the government as it represents irresistible low-hanging fruit.

The entry into law of tougher sanctions and eventual closure of the WDF in 2018 will coincide with the global Common Reporting Standard (CRS) data-sharing initiative to which over 100 countries have so far signed up. Armed with information through the CRS, it is understandable that HMRC is bullish when its director-general of enforcement and compliance, Jennie Granger, says, “We will find those who think they can dodge paying tax in this country”. It would be amusing, were it not so serious, to only discover that you are actually a beneficiary of some offshore trust or asset when an HMRC penalty notice drops through the letterbox. You do not usually "dodge" something you do not know is coming.

However, it is perhaps unlikely that the overall practical effect of this seismic change in approach to tackling tax evasion will disproportionately punish the innocent or feckless. However, those with income, assets and interests outside of the UK should seek appropriate tax advice to avoid the risk of a failure to comply, assuming that they are necessarily fully aware of what they are entitled to and that should have been declared.