SPAIN: HMRC’s Offshore Victory to Endanger Many Taxpayers

Santa Cruz de TENERIFE, Spain (Tenerife News), May 24, 2006: Don’t bank on banking secrecy to protect you from the taxman! UK advisory firm PKF has estimated that following HMRC’s victory at the tax tribunal forcing Barclays Bank to disclose details of thousands of its customers who hold offshore accounts, the Revenue could uncover up to £4bn in unpaid tax once investigations are extended to all major UK banks. After the IRS had considerable success in the US courts with similar fishing expeditions, the Barclays case is HMRC’s test of whether it can lawfully demand such blanket data as documents about all customers with UK addresses and non-UK bank accounts. PKF says that with offshore savings accounts becoming increasingly popular with UK citizens, in line with the easy availability of credit and debit cards, HMRC’s UK-based investigation work over a number of years has shown that, where there is tax evasion, an offshore bank account is often involved somewhere in the chain of the evader’s arrangements. Going direct for offshore accounts is, therefore, an easy way to identify much larger tax frauds. It is supposed that HMRC will now start searching the data to uncover UK residents who have not declared the interest on accounts held in offshore locations such as the Channel Islands. Although of course the EU’s Savings Tax Directive will be ensuring that at least 15% tax is reclaimed via the offshore authorities, the marginal UK rate of most British account holders will be much higher. PKF tax investigations partner, John Cassidy, thinks that the Revenue will also take on other UK banks and financial institutions and that its investigations into unpaid interest will lead to more detailed scrutiny of the source of the funds placed in offshore accounts. He said, “This is massive. In the coming months, the Revenue will receive details of just about everybody in the UK who holds an offshore bank account. This will lead to demands for an enormous amount of tax on any undeclared interest earned on those accounts. “But the Revenue will not stop there. If the source of funds deposited in the account comes from undeclared profits, the Revenue will seek tax on those amounts as well. An example referred to in the current case concerned less than £1,000 of undeclared bank interest but led to the discovery of over £576,000 of undeclared business takings going into the account. “The message is clear for anyone holding offshore accounts. If undeclared interest is found, the Revenue will investigate thoroughly and widen its enquiries to cover the individual’s entire business life. Anyone with an offshore account should seek immediate help to rectify any problems with their tax affairs. Voluntarily disclosing any omissions from their tax returns will help to minimise any financial penalties that are likely to be levied.” By Bill Blevins Financial Correspondent Blevins Franks Copyright 2005 Tenerife News - Canary Wharf S.L.