Tax evaders who hold money in offshore bank accounts could be in for a nasty
shock. The implications of the European Savings Directive, which comes into
force on 1 July, will allow the Inland Revenue to shine a new light on offshore
tax havens, opening the way to hundreds, if not thousands of investigations.
The directive forces banks in the EU and in its dependent territories –
including some tax havens beloved of UK citizens – to disclose information about
With figures of a potential yield for the Revenue of hundreds of millions of
pounds, as a result of potentially thousands of enquiries about bank accounts
held offshore, tax advisers are bracing themselves for a likely clampdown.
The idea that you can avoid tax legitimately by keeping money offshore is a
common misconception, said John Whiting of PricewaterCoopers: ‘Anybody who is a
serious player and has an adviser won’t be trying to conceal money offshore.’
One of the problems is that many people think paying bonuses or other
windfalls into accounts in the Channel Islands allows them to avoid tax. Up
until now, it has allowed them to evade tax, Whiting said, but not any longer.
The Revenue itself does not comment on its compliance activities, but
observers have said that the number of accounts probed could even be in the
thousands. Questions are expected to be asked from 30 June 2006, when the first
details of accounts have to be sent to the Revenue.
The move has thrown up an interesting anomaly, according to Tenon’s tax
director Chris Mills. Some territories can avoid the disclosure rules if they
apply a windfall tax to interest on the savings. But individuals will not have
to pay that tax if, in the UK, they are resident but non-domiciled.
They will, in turn, have to prove their status. Mills said this would lead to
many individuals transferring money from Belgium, Luxembourg and Austria, which
have opted for the tax, to places like the Channel Islands, which have not.
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