Tax & Accounting News

Offshore tax evasion

18/03/2008

Britons who earn savings and investment income abroad are being warned to put their tax affairs in order as soon as possible as HM Revenue & Customs (HMRC) continues its crackdown on offshore tax evasion.

At the end of February, HMRC announced that it had questioned two men in the north of England on suspicion of offshore tax evasion, believed to have cost the taxman more than £1 million, following an inquiry into business and personal offshore bank accounts belonging to the men. Homes were searched, along with business premises, and a man arrested at his home was bailed pending further inquiries.

And on 17 March, HMRC announced that it was stepping up its pursuit of people with offshore accounts and tax liabilities who failed to take advantage of an amnesty in 2007. Under the amnesty, launched last April, the holders of offshore bank accounts had until 22 June 2007 to notify HMRC that they intended to disclose any unpaid tax, plus any other undeclared liabilities, going back up to 20 years.

In return, HMRC agreed to limit penalties for those who admitted owing tax to ten per cent of the outstanding bill, with no penalty for anyone owing less than £2,500. The deadline to make the disclosure, and pay all the money owed, expired on 26 November 2007, with HMRC expecting to collect £500 million from the exercise.

Now HMRC has warned that it will contact the holders of offshore bank accounts who did not disclose, saying that in some cases they could face penalties of 100 per cent of the tax due and, in exceptional circumstances, even criminal investigation. Depending on the circumstances, account holders could receive:

• a letter and an initial form, which could be followed by a disclosure form so that account holders with unpaid tax can bring their tax affairs up to date

• a formal notice of enquiry into a self assessment return or the issue of a self assessment return for any years where none has been submitted

• in certain exceptional circumstances, a criminal investigation may be launched.

Barry Lewis of Harris Lipman said: “HMRC has made it very clear that it intends to use all the powers at its disposal to pursue offshore account holders for any unpaid tax.

“Although it would have been wise to take advantage of last year’s amnesty, anyone who failed to do so should take steps now to sort out their tax affairs, to put themselves in a more favourable position with the taxman.

“There are harsh penalties on top of any overdue tax, so for anyone in this position it would certainly make very sound sense talk to a financial professional, such as a chartered accountant, to resolve any outstanding issues and to make a voluntary disclosure as soon as possible, rather than waiting for HMRC to come calling.”

 

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