More amnesties means more problems for HMRC and tax advisers

“A NUMBER of countries long seen as tax havens are looking at the advantages that come with disclosure regimes. We are talking to them.”

Those who have untaxed funds salted away offshore may see this announcement regarding more tax clampdowns as mere rhetoric from HM Revenue & Customs’ head gamekeeper Dave Hartnett – but they would be wrong.

This is the first time Hartnett has given concrete assurances that talks with other countries are taking place, as opposed to the unattributed rumours that usually circulate around Whitehall.

This is a genuine indication that similar deals to Liechtenstein are in the pipeline.

But more amnesties don’t just complicate life for tax advisers and their clients – it also impacts the taxman.

It means a bigger workload for HMRC. More jurisdictions – each running amnesties with different terms – means a greater volume of taxpayer information to trawl through.

The flood of information from those making disclosures, plus further bank data from the jurisdictions in those countries, waters down HMRC’s strong position.

It has been well-trailed that the taxman has limited resources to achieve its goals of foiling tax evasion.

A £900m injection to combat avoidance and evasion seems a lot, but this must be taken in the context of the difficulty in accessing information of people who use the most intricate means to keep their funds hidden.

HMRC will still be trying to flush out the people who remain hidden alongside efforts to make sure those who come forward have made accurate disclosures.

Tax advisers and clients must consider that future agreements may not have the same terms as the Liechtenstein deal and this presents its own set of issues.

Advisers say the taxman will baulk at offering similar terms to the Liechtenstein deal because it will not want to give those who did not come clean in the LDF.

For example, take a potential with Switzerland, the country previously regarded as an impenetrable fortress in terms of secret offshore accounts.

Liechtenstein stats

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Taxpayers who haven’t used the LDF would likely face stiffer penalties and interest payments than in previous amnesties, giving the advantage to the taxman in terms of revenues.

But differing penalty regimes and rulebooks in an area as complex as secret offshore accounts – where individuals each have their own unique set of circumstances in terms of where and how long they have held their assets – means the complexity burden also ramps up on HMRC.

This complexity will hamper efforts to wrap up cases quickly at a time when the department is under pressure from Westminster to bring in revenues as quickly as it can.

HMRC is in uncharted territory at the moment and has a massive task on its hands to foil evasion, but some key advances have been made.

The Liechtenstein rules have been tightened up – advisers must now audit clients and also make them demonstrate that they are UK tax compliant.

The Second Joint Declaration between the UK and Liechtenstein has clarified that those auditing accounts will also find themselves facing penalties if the taxman believes the disclosures made by their clients have kept some assets hidden.

There is also a rule forcing any property registered in Liechtenstein to “meaningful and of sufficient value and permanence,” the declaration states.

“Liechtenstein is clearly concerned that its banks are being used to provide short term assets for the LDF and this declaration points towards some hardening in what qualifies and what does not which is helpful,” said Gary Ashford RSM Tenon’s tax investigations expert.

Everyone is now waiting with baited breath to see how the Switzerland deal recently announced will pan out and any future deals in the wake of it.

Whatever happens, life is set to become more interesting for advisers, their clients and the countries which hold funds which need to be trimmed for UK tax purposes.

“Every day HMRC exposes more money hidden offshore,” Dave Hartnett added.

“So burying your head in the sand is becoming a very expensive and risky option.”


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