UK and Europe’s plan to ‘hammer blow’ to tax evasion is a step in the right direction
Registries of beneficial ownership and exchange of data between EU tax authorities is a step in the right direction, but much will have to be done to ensure it has a real lasting impact, said London Chartered Accountants Blick Rothenberg LLP.
Gary Gardner, partner and tax dispute specialist at Blick Rothenberg, said:
“The UK’s new register of beneficial ownership and that of its European counterparts will require companies to disclose disclose details such as the names of ultimate beneficiaries of corporate structures and is welcome.
“But the real problem arises in checking the accuracy of disclosures and this is more of a problem for Companies House than for HMRC. As yet there have been no announcements as to whether extra resources will be provided to Companies House, or HMRC, to check disclosures and enforce compliance.”
The recently announced agreement initiated with Germany, France, Italy and Spain will see tax and law enforcement agencies from the five countries exchange data on company beneficial ownership registers and new registers of trusts, allowing for more effective investigation of financial wrongdoing. This move aims to make public the names of ultimate beneficiaries of corporate structures, including shell companies, trusts and foundations.
Gary continued:
“It may be envisaged that any such compliance activity will eventually fall on HMRC, but given the recent announcements on the huge scale back in resources and presence, it calls into question how effectively any new information on beneficial ownership will be used.
“Registry activity from Companies House indicates that around 500,000 companies fail to file annual returns and it seems very little, if anything, is done to enforce compliance and instead the companies are simply dissolved. HMRC can and do reinstate companies to the register but again this is a very resource intensive process that requires action before the High Court (Companies Court) and only a handful of such cases are pursued. Determined fraudsters, including tax evaders currently have little to fear and can trade without any intention to file knowing the likelihood of being pursued by Companies House or HMRC is minimal.
“In most of the cases, the great bulk of data exchanges on beneficial ownership will relate to companies and other legal entities who are already fully compliant with both their Companies House and HMRC filings. Most of us would agree that sharing data on compliant companies is a waste of time – it is the deliberate non-compliant companies that need to be pursued.
“There is an argument that the only effective approach would be to require the banks and other financial institutions to provide the information they are obliged (by anti-money laundering legislation) to hold on the beneficial ownership of the companies to whom they provide services directly to HMRC.
“Progress with the UK’s overseas territories introducing further transparency with beneficial ownership will also be critical to the success of any overall strategy to combat offshore tax evasion.”
