George Osborne announced on 14 April that the government intend to consult on plans to introduce a new strict liability criminal offence for individuals who hold money offshore. HMRC will only have to demonstrate that income is taxable and undeclared to secure a successful criminal prosecution. For example –
- Rose comes from a poor family in Jamaica. She has been recruited by the NHS to work in a London hospital. She works very hard and leads a frugal life because she wants to send as much as she can back to Jamaica so she can put together the deposit on a house for her mother to live in. It has taken a long time to build up sufficient funds because the interest paid on the bank deposit in Jamaica is very low. Rose is paid by the NHS under PAYE and has never been sent a tax return in the UK.George Osborne wants to send Rose to jail. He thinks she should know that her Jamaican bank interest is taxable here and that it is her responsibility to tell HMRC that she is receiving Jamaican bank interest even though she has had no communications from HMRC other than her PAYE Notice of Coding. As the law stands, she cannot be sent to jail because she has no intention of avoiding tax; she is simply unaware, like the vast majority of the people who live in this country, of her tax obligations. George Osborne does not believe in reasonable excuses and thinks Rose should go to jail.
- Raj is an Indian computer programmer. He lives and works in India. He is sent by his employer to work in the UK for six months. While here, he sells some Indian shares and pays tax in India on the capital gain.George Osborne wants to send Raj to jail. Because he is here for six months, he is resident here. As a resident, he is liable to tax here on his Indian capital gains. There is probably actually no tax to pay as the UK will give credit for the Indian tax paid. Nevertheless, Raj should have declared the capital gain so in George Osborne’s view he should go to jail.
- Mary has always lived in the UK, but two years ago took a job in France. Her mother became seriously ill and Mary came back to the UK to look after her. In order to nurse her mother, Mary stayed in her mother’s house. Mary’s French employer is very understanding and continues to pay her salary into her French bank account on the understanding that Mary will work at least four hours each day remotely over the Internet. Sadly, Mary’s mother died and after the funeral Mary returned to France. She was in England for 100 days and did not even consider that she might be taxable here.George Osborne wants to send Mary to jail. Because she was here for 100 days, had been UK resident here within the previous three years, lived in her mother’s house and did some work in the UK, Mary became resident here (although it is improbable that she knew it). As a resident, she is taxable on her French salary in the UK even though it has been taxed in France and the French tax is likely to eliminate any UK tax liability.
Of course, George Osborne undoubtedly did not have Rose, Raj and Mary in mind when he devised his new criminal offence. They are what the Americans call “collateral damage”. George wants to send people to jail who evade tax by hiding their offshore income from HMRC. However, he thinks it unreasonable that HMRC should have to show that such people intended to evade tax in the same way as the State has to prove that a person is guilty of any crime before he can be sent to jail. He wants HMRC to be able to send Rose, Raj and Mary to jail simply because it is too difficult for HMRC to distinguish between criminals and those who are simply ignorant or naïve. Curiously, the Human Rights Act provides that, “Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law”. Fortunately for George, the Human Rights Act also provides that the UK Courts must ignore human rights if it is not possible to interpret the legislation in such a way as to give effect to them; but then the Human Rights Act is based on the European Convention on Human Rights and, just because those nasty foreigners believe that innocent people should not be jailed at the whim of the State, doesn’t mean that the UK should adopt the same attitude. After all, George Osborne is constantly telling us that he is committed to a fair tax system, so it must be fair that Rose, Raj and Mary should be sent to jail to punish them for their ignorance of the details of our highly complex tax system.