Changes to the penalty regime for tackling offshore tax evasion are set to come into force later this year, HM Revenue and Customs (HMRC) has confirmed.

From 6 April 2011 new penalties will apply to income tax and capital gains tax. They will be linked to the tax transparency of the territory in which the income or gain arises.

Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.

There will be three new levels of penalty:

• where the income or gain arises in a territory in 'category 1', the penalty rate will be the same as under existing legislation


• where the income or gain arises in a territory in 'category 2', the penalty rate will be 1.5 times that in existing legislation - up to 150% of tax


• where the income or gain arises in a territory in 'category 3', the penalty rate will be double that in existing legislation - up to 200% of tax

Commenting, David Gauke, Exchequer Secretary to the Treasury, said: 'The game is up for those going offshore to evade tax. With the risk of a penalty worth up to 200% of the tax evaded, they have a great incentive to get their tax affairs in order.

'We have given HMRC an extra £900m to tackle tax cheats because we are prepared to act against the minority who refuse to pay what they owe.'

Dave Hartnett, Permanent Secretary for Tax, at HMRC said: 'We are serious about tackling offshore evasion. Hiding tax liabilities offshore believing that you will never be discovered is no longer a realistic hope.

'These new penalties will increase the deterrent against offshore non-compliance. They build on other activity, including signing tax information exchange agreements, requiring information about offshore bank accounts and disclosure opportunities, including the Liechtenstein Disclosure Facility (LDF).'