HMRC faces wall of silence from banks over offshore accounts

The banks are revolting. For once, this is not criticism aimed at risky off-balance sheet accounting or bonuses. It actually refers to some of the 308 institutions that advisers say are resisting demands for overseas accounts information from the taxman.

But how far back will this put HMRC’s efforts if it has to trawl through a backlog of appeals to these so-called Schedule 36 Notices, which advisers say banks are seriously considering?

The only grounds for appeal for banks is that the taxman’s request was “unduly onerous” for them to comply with.

John Cassidy, tax investigations partner at PKF, said: “In the vast majority of cases the unduly onerous defence is not going to work”, but banks were still mindful of their obligations to clients. Although most banks would not appeal, he surmised, the challenges that were lodged would still be a headache for HMRC.

“It certainly won’t be a migraine, but it will be a minor headache that’s going to need an aspirin or two. Whether they appeal or not, banks have a duty of client confidentiality in addition to complying with the notices. They shouldn’t just accept it willy-nilly,” he added.

But they face a torrid time. “[Banks] have got vast amounts of money here, or in the Channel Islands or maybe in their home country, on behalf of UK residents,” HMRC’s permanent secretary Dave Hartnett has said.

“Certainly some parties are looking to take this forward to appeal. This issue is really going to run for some time,” said Sue Holmes, head of tax investigations at Smith & Williamson. “There is a huge amount of confusion among the banks. They want to help HMRC in any way they can, but the banks also have to balance this aim with maintaining client confidentiality.”

The tax notices are part of HMRC’s move to expose tax avoiders who have salted away undeclared income in tax havens, and it has demanded the banks open up client lists.

Holmes said the generic nature of the notices, which have been sent out in boilerplate form to all of the 308 banks, had also stumped the banks. She flagged up a potential issue around its request for account information not specifying whether this meant cash accounts, investment acc-ounts or trustee accounts ­ or all of the above.

The taxman is making efforts to help banks clarify their positions by rolling out guidance, but it is staying tight-lipped about the appeals it may have received. “We won’t comment on whether there have been any appeals,” an HMRC spokesman said.

IN OUR VIEW

Client confidentiality may go out of the window because of the legal muscle contained in the Schedule 36 orders. Whatever the burden on banks, HMRC is looking to nip tax evasion in the bud.