From 31 January 2018, UWOs can be issued by the English High Court to enforcement authorities (including HMRC) in respect of (i) non-EU Politically Exposed Persons (PEPs) and (ii) any person reasonably suspected of involvement in serious crime (whether in the UK or elsewhere). The trigger for the issue of a UWO is asset ownership. The value of the asset must be in excess of £50,000. If a person’s known lawfully obtained income would not appear to explain how the person could afford to own such an asset, the grounds for the issue of a UWO are starting to be made out.
A surprisingly wide range of people could be affected. The term PEPs includes persons in a prominent public function in another jurisdiction or in an international organisation. However, persons closely associated with them, family members and people otherwise connected are also regarded as PEPs for these purposes. There need be no suspicion that a PEP has been involved in serious criminality – that is reserved for category (ii) above. The asset does need to be personally held, though, which raises questions of whether structured family wealth could be quite so vulnerable.
The aim of the new measure is laudable, no doubt. Not many wish to see their neighbourhood become a repository for ill-gotten gains. However, although the issue of a UWO is not tantamount to an order for recovery of the asset, being asked how you can afford it is another blow for personal privacy. It places the onus on the asset owner to explain himself and, in the case of a PEP, without the need for any suggestion of wrongdoing. A perceived failure to comply with the order could put the asset at risk, although the asset itself need not be located in the UK to be within the scope of the new measures. The court can also apply an interim freezing order in relation to the asset. Failure to comply with a UWO is also a criminal offence.
Many non-dom PEPs resident in the UK could have UK assets far out of proportion to the income they are obliged to declare (which may not be all of their income). The new arrangements beg the question whether HMRC will use UWOs to obtain information about a non-dom’s foreign income and gains that they are not otherwise entitled to know. HMRC may have been handed significant extra powers with these new rules.
The gatekeepers to such orders will be High Court judges, many of whom may not be tax experts. Let us hope that they will exercise their powers wisely.