Trusts and partnerships targeted as banks put on notice of amnesty

The taxman has widened the reach of its anticipated second crackdown on offshore accounts to target
trusts and partnerships, as well as individuals.

This week HM Revenue & Customs revealed the first 30 banks have received letters requesting details of customers suspected of holding undeclared funds offshore.

Accountancy Age has learned that among those to receive letters are the Bank of Cyprus and the Bank of India. Around 500 institutions are expected to be included in HMRC’s second amnesty ­ or offshore disclosure facility ­ which seeks to recover tax on interest generated by funds held overseas by UK residents.

Last week it emerged the terms of the second amnesty mean account holders are likely to pay a penalty of 30% of tax owed, if they come forward to declare offshore income.

A copy of the letter sent to the Bank of India was dated 27 February 2009 and was issued by HMRC’s offshore accounts department on Merseyside. It is understood the same letter was sent to the Bank of Cyprus and the other banks in the group of 30.

The letter said: ‘Based on evidence in our possession about some of your customers, HMRC is considering an application to the Special Commissioner… for consent to issue a notice to you under Section 20 (98A) of the Taxes Management Act 1970.’

The letters requests a meeting with bank officials and outlines the legal procedure HMRC will take in securing bank account details. It also requests information on how the banks are structured and documents relating to UK customers ‘holding offshore accounts and investment vehicles.’

An HMRC spokesman confirmed it has issued 30 institutions with the letter but would not disclose their identity.

He said there was yet to be a response from any of the banks and declined to say how many accounts HMRC is likely to scrutinise.

The one-page letter is accompanied by several pages outlining the legislation in the Finance Act 2008 and HMRC’s powers in obtaining information and documentation from customers of the banks.

By sending the letter, HMRC is thought to be attempting to avoid the need for a legal order forcing disclosure by the banks under a new tribunal system launching on 1 April.

‘The reason HMRC is doing this is to avoid a challenge and smooth it through on a voluntary basis or tee it up before they have to use their statutory powers. The new system is fraught with danger… it’s yet to be tested,’ a source close to bank customers said.

The first amnesty in 2007 netted £400m and targeted an estimated 100,000 taxpayers with accounts in the five major retail banks.

Bank of India and Bank of Cyprus had not returned calls as Accountancy Age went to press.