Governments across the world are offering tax evaders a last chance to own up to undeclared accounts before a co-ordinated global crackdown on evasion that will allow tax authorities to probe secret foreign accounts.
By 2017, governments will be able to exchange tax information automatically to facilitate transparency in the international job market and expose offenders to the risk of prosecution.
Before the new regulations come into force, many governments have been successfully encouraging taxpayers to repatriate offshore funds and disclose undeclared accounts.
However, Jon Clarke, commercial compliance manager at CXC Global urged contractors to “get their affairs in order”, especially seeing as some of these ‘voluntary disclosure initiatives’ are being closed early.
He said: “In the past some contractors may have been advised to ‘stay under the radar’ when operating in a foreign country, however things have drastically changed and anyone attempting to continue do this in the future is likely to be on the receiving end of a heavy fine or other more serious sanctions.”
By the end of March, the UK exchequer had already collected £1.1 billion thanks to partial amnesty programmes, which have encouraged thousands of offenders to come forward.
HM Revenue and Customs (HMRC) require companies that engage contractors to take on a “greater role” in identifying those in disguised employment.
These changes were outlined in an 11-page “discussion document” published earlier this month in which the taxman gave engagers the responsibility of ensuring IR35 compliance.
Employment taxation expert Chris Thomas of Pinsent Masons told Out-Law.com that it is common practice for a business to take on a contractor without worrying about their employment status. Therefore, passing on greater responsibility to the service user would be a “fundamental change” to existing practice.
Mr Thomas said: “Moving the onus to employers clearly makes sense from HMRC’s perspective given the difficulties of checking the engagements of multiple individual PSCs and the difficulty of recovering any tax which proves to be due.”
He added that this will be an administrative burden for businesses, who will have to assess the employment status of all of their PSC contractors.