Taxman to take second bite of offshore cherry

Plans to offer British tax payers 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.