TaxCorporate TaxTax disclosure cases could soar

Tax disclosure cases could soar

Evidence found in details of offshore accounts taken from high street banks by taxman could lead to accounts with other financial institutions

The taxman, currently sifting through offshore account details held at the
five biggest high-street banks for potential tax evaders, could be sitting on
evidence that will eventually give it access to clients of dozens of other
financial institutions.

At an offshore disclosure facility seminar, organised by law firm
McGrigors,
KPMG’s head of tax investigations Reg Day revealed that a substantial proportion
of his firm’s clients from outside the ‘Big Five’ banks had already made a
request to disclose.

HM Revenue & Customs created its offshore disclosure facility after
gaining access to the offshore account details of clients of the five biggest
high-street banks.

Day suggests that if KPMG’s clients were representative of the total
disclosing under the facility, then the taxman might have to revise its figures
for the number of accounts it would be investigating.

HMRC had said that of the 400,000 offshore accounts it had gained access to,
around 100,000 were suspected of evading tax.

As only 62,000 in total have declared under the disclosure facility, it seems
likely that around 38,000 clients of the Big Five banks have failed to disclose.

That could mean as many as 60,000 are refusing to disclose, according to Day.

If true, this could present substantial resource problems for HMRC, which Day
believes is handling 3,500 non-disclosure cases a month.

Delays could push back HMRC’s plans to investigate the clients of the 170
financial institutions it has been in discussion with over providing the taxman
with the details of offshore accounts.

Day expects that the institutions will hold back from handing the information
straight over to HMRC as doing so would most likely break confidentiality
agreements with their clients.

This point is understood by HMRC, which is prepared to wait for the
institutions to state that they could not hand over information, before going to
the tax courts to force them to do so.

‘It protects confidentiality in the sense that the banks can’t disclose, but
say they will if forced,’ says Day.

With HMRC seeking further information about offshore accounts, Day said that
he was ‘sure’ there would be another disclosure facility.

HMRC’s draft questionnaire to the 170 banks still to provide details of
offshore accounts asks for information held in the UK about customers, both past
and present, who hold a non-UK bank account.

The questionnaire also asks whether information about such accounts is
accessible in the UK.

This could be important legally in terms of whether HMRC is allowed to access
such details in the future.

The taxman also provides timeline details of the proposed process to the
institutions which suggest that it could drag on past April 2008.

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