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.


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.

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