Taxman to take second bite of offshore cherry

Jersey

Plans to offer British taxpayers a second chance to come clean about offshore bank accounts could help speed up a complex crackdown on evasion.

HM Revenue & Customs has already granted one amnesty to those hiding money in offshore accounts to pay outstanding tax, plus interest and a 10% penalty.

Last year HMRC raised £400m after UK taxpayers with money in offshore accounts run by high street banks were offered leniency in return for voluntary disclosure.

Tax experts said HMRC raised less money than it hoped under the offshore disclosure facility, however, and have called for the second amnesty to be given more publicity.

A second amnesty on the income tax owed on interest earned in overseas accounts could help HMRC clear the backlog of cases in its offshore banking investigation, covering tens of thousands of investors with bank accounts in offshore centres ranging from Liechtenstein to Bermuda and Jersey.

Last month HMRC said it had opened enquiries into 12,000 accounts and would proceed with a further 79,000 over the next two years.

Plans for a second amnesty come as HMRC faces growing pressure to show a breakthrough in its investigations.

It is keen to announce a high-profile criminal prosecution of taxpayers to act as a deterrent and show progress, but none has been forthcoming.

Some experts have said HMRC does not have enough experienced staff to manage the investigation and much of the information it has obtained from banks is of poor quality.

At a meeting earlier this month with tax experts from the accountancy institutes and big firms, HMRC confirmed that it was considering a final offshore tax amnesty. It is expected to be based on information from a much wider range of financial institutions ­ possibly more than a hundred.

HMRC has also told accountants that it is considering a series of offshore tax amnesties, although this is thought to be the less likely option. ‘It’s aimed at clearing the bulk of low risk and low value [unpaid tax] cases,’ said one tax partner familiar with the HMRC offshore crackdown.

Tax experts expect the penalty for a second tax amnesty to be slightly higher than it was under the first one, probably at around 15%.

‘If a client [with undeclared tax from an offshore account] phoned me tomorrow my advice would be to settle now rather than wait for a second offshore disclosure facility,’ said a director of tax investigations at a large accounting firm.

The prospect of a tax amnesty has been given a cautious welcome by accountants, although one told Accountancy Age that HMRC had spent too much time focusing on relatively small cases and not enough on large cases involving rich investors and companies.

HMRC has always insisted that the investigation remains on track, adding it has enough staff working on the investigation.

In an effort to clear some of the smaller cases, HMRC has written to around 5,000 individuals who are suspected of failing to make disclosures under the first tax amnesty. The letters are a more low-key approach to formal enquiries that do not involve large sums of money but can be expensive and time consuming.

HMRC is also relying on technology to help it close the net on offshore bank accounts used
for tax evasion.

Investigators are using powerful software to compile evidence of accountants linked to offshore
tax evasion.

This could pave the way for prosecutions of accountants if they are shown to be complicit in a client’s offshore affairs, HMRC has warned.