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International tax enforcement group to target cryptocurrencies

The UK's HM Revenue & Customs (HMRC) has entered into an alliance with tax enforcement bodies in Australia, Canada, the Netherlands and the United States to share intelligence and expertise in the battle against international tax crime.05 Jul 2018

The new group, called 'Joint chiefs of global tax enforcement' (J5), was formed in response to a call from the Organisation for Economic Cooperation and Development (OECD) for countries to do more to tackle the enablers of tax crime. The members of the J5 include the heads of tax crime and senior officials from the five countries concerned.

HMRC's press release explains that the five countries face similar threats from "organised crime groups and wealthy offshore tax evaders who are well resourced and have access to professional enablers to hide income and assets using the global financial system".

Having a small number of partners will allow the J5 group to be more agile and flexible to develop new approaches and carry out joint operations, according to the press release. It confirms that any results and benefits will be shared with wider international partners.

One of the areas where the J5 will collaborate will be in taking action to reduce the threat to tax administrations posed by cryptocurrencies and cybercrime, according to an Internal Revenue Service press release.

"As a result of information exchanges under the common reporting standard (CRS), tax authorities have (or will soon have) vast amounts of information about funds held offshore in traditional ways such as in bank accounts. This move shows that tax authorities are now turning their attention to newer ways of concealing undeclared assets, such as the use of cryptocurrencies," said Steven Porter, a tax expert at Pinsent Masons, the law firm behind Out-law.com. 

In September tax authorities will obtain the first tranche of information about financial accounts in existence in countries which are 'late' adopters of the CRS. This includes information from the major financial centres of Switzerland, Hong Kong, Dubai and Singapore. Information about accounts held in the UK's crown dependencies and overseas territories and in early adopter countries was first exchanged in September 2017.

"HMRC is putting significant resources into tackling offshore tax evasion. Those caught face the risk of criminal prosecution or very hefty financial penalties. The new J5 initiative coupled with the huge treasure trove of information HMRC can draw upon from its 'Connect' database, enhanced with CRS disclosures, mean it is far more likely now that tax evaders will be caught. Anyone with concerns about their tax position should take advice before HMRC comes knocking," Steven Porter said.   

Three new 'strict liability' criminal offences for tax evasion with an offshore element were introduced from the 2017/18 tax year. They apply where a UK taxpayer fails to notify HMRC of their chargeability to tax, fails to file a return or files an incorrect return in relation to offshore income, assets or activities; provided that the amount of underpaid tax is £25,000 or more in any tax year. The 'strict liability' nature of the offences means that, unlike previously, HMRC will not need to prove that the taxpayer's actions were dishonest.

HMRC has also recently consulted on a proposal to extend the time limit for assessing back taxes to 12 years where there is an offshore element. The current limits are four years, or six years where a suspected underpayment has been brought about due to carelessness. The time limit will remain 20 years where the taxpayer has acted deliberately or dishonestly.