Taxpayers avoiding tax on offshore income by applying for non-domiciled tax status have been warned that the taxman will fight their applications in the courts.
An HMRC spokesman said the taxman would not tolerate such claims and would go all the way to the courts if it felt that taxpayers were making disingenuous applications for non-domiciled status in order to avoid disclosing offshore bank accounts.
'From the start this is not going fly. Where we suddenly see non-domiciled applications from people in their forties, fifties and sixties who have never claimed to be non-doms before, we are going to take a very hard look at them and challenge applications in the civil courts if we have to,' the spokesman said.
The comments suggest there could be some high-profile clashes over non-domiciliaries, and, in the absence of a review of the controversial rules, represent the hardest line the government has recently taken on the issue.
There has been frenzied discussion of the rules in the last week amidst fears that the tax amnesty will see tens of thousands 'discover' their non-dom status.
Figures released by HMRC showed that during 2004/2005 112,000 people had applied for non-domiciled status, which exempts UK residents domiciled abroad from tax on foreign earnings.
The number of applications represents a 74% increase on 2002 figures and experts believe that by the end of this year the number of applications could surge past 200,000 as taxpayers attempt to skirt the Revenue's crackdown on undeclared offshore bank accounts.
Pressure has been mounting on the Treasury to reform the current non-domiciled exemptions, with unions and tax campaigners claiming that the rules are unjust and deepen inequality between the rich and the poor.
Chancellor Alistair Darling has suggested that he is in favour of leaving the system in place, although officially the Treasury has maintained that the matter is under review and that no formal policy decisions have been taken.
Further reading:
Read about HMRC's offshore disclosure facility
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