Banks fail to tell clients about amnesty

The first that many offshore account holders will know their confidential
account details have been passed over to the taxman – as part of an attack on
tax evasion – is when a letter from HM Revenue & Customs hits their

A large proportion of the 308 banks having to pass confidential client
details over to the taxman have not informed their clients that they may be
doing so. Based on their dealings, advisers have estimated more than half may
have failed to tell account holders.

The situation, triggered by HMRC’s crackdown on offshore tax evasion, is sure
to raise concerns that customer confidentiality, one of the main planks of the
banking system, has been bypassed.

Accountancy and legal advisers have criticised the short timeframe of HMRC’s
New Disclosure Opportunity (NDO), the tax amnesty flagged up by the taxman as
the last chance to come clean about tax owing from undeclared income held in
offshore accounts.

The deadline was extended to 4 January from 30 November as banks came under
pressure to comply with the legal obligation to hand over client information
under Schedule 36 notices. The amnesty began in September.

An HMRC spokesman told Accountancy Age it was a “distinct possibility” that
many account holders would first find out about the disclosure of their details
through an enquiry from the taxman, but maintained a tough line, saying offshore
account holders had been given the opportunity to come forward voluntarily.
“Information is moving from the banks. There’s a distinct possibility [customers
will be unaware their account details have been passed on] but we had a major
advertising campaign and took very significant steps to make sure everyone was
made aware of the NDO.

“Everyone knows if you came forward voluntarily, you get a lower penalty than
if we come looking for you.”

The 308 banks targeted by Schedule 36 are not legally bound to inform clients
that details are being passed on to HMRC, and fears of reputational damage
generated by issuing a blanket letter to customers were cited as potential
reasons for holding off informing clients.

Simon Airey, partner at law firm DLA Piper, said banks were currently
considering which customers were “in scope” of the Schedule 36 notices and did
not want to “spook” them unnecessarily.

“The banks will be a little bit nervous. They don’t want to create the
impression that legitimate customers have done anything wrong. It will still be
one to two months before they get the information over to HMRC. A lot of the
banks are still in negotiations with the Revenue, working out their position.
Writing to too many clients could spook the herd. Also, writing to too few
before contacting others later could be a PR disaster. The NDO has been a case
of bad timing.”

After being hit with the Schedule 36 notices, banks scrambled to work out
their powers of possession – the information they were allowed to disclose about
client accounts – before starting the daunting task of collecting the
information and checking it for accuracy.

Concerns have been raised about HMRC’s powers. The CIOT recently said HMRC is
using its new information powers to “obtain huge amounts of data from third
parties about individuals’ tax affairs”, citing the Schedule 36 notices.

“There’s great uncertainty as to which banks have sent [client] information
out,” said Mike Down, tax investigations partner at Baker Tilly. “Some of the
banks feel they shouldn’t be supplying this information. The timing of the NDO
was very strange and the advertising was poor.”

The British Bankers Association was not asking its members whether they were
writing to their customers in relation to Schedule 36 notices, a source said.

Further reading:

to blow overseas accounts wide open after Schedule 36 win

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