Tax & Accounting News

Offshore Disclosure

09/05/2008

Britons with overseas savings or investment income may find themselves facing further investigation by the taxman.

A new round of enquiries forms the latest stage of an HM Revenue & Customs (HMRC) investigation into people with offshore accounts that started in April 2007. The holders of such accounts were then given two months to notify HMRC that they intended to disclose any unpaid tax, plus any other undeclared liabilities, going back 20 years.

In return, HMRC agreed to limit penalties to those who admitted tax to ten per cent of the outstanding bill, with no penalties for debts of less than £2,500. The deadline to make the disclosure, and pay money due, expired on 26 November 2007.

HMRC agreed to either accept the disclosure or make further enquiries by 30 April this year. The majority of disclosures have now been accepted, but where a disclosure has been selected for further review, the taxpayer may receive an initial enquiry letter or a face full enquiry.

The enquiry letters, issued by HMRC’s offshore bank unit, seek clarification of points within the taxpayers’ disclosure. Depending on the response, the HMRC will either accept the disclosure or move onto a full enquiry.

Full enquiries will be carried out by HMRC’s Special Civil Investigations or Civil Investigation of Fraud teams and require the taxpayer to provide comprehensive documentation, including personal and offshore bank statements.

Barry Lewis, senior partner at Harris Lipman, said: “Issues that the HMRC is pursuing include challenging the number of offshore bank accounts disclosed and requests for access to business records. This is presumably because HMRC believes that profits may have been understated and switched to offshore accounts and the source of those funds has not been correctly disclosed.

“If the taxpayer does not respond to HMRC enquiries, they face all the implications of an intrusive investigation, with potential penalties.

“This latest HMRC action emphasises once again that it intends to use all the powers at its disposal to pursue offshore account holders for any unpaid tax.”

 

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