Business Briefing: Time to reveal the offshore stash

Get a weight off your treasure chest, or be hunted down by the taxman. Tessa Thorniley reports
Click to follow
The Independent Online

Offshore bank account holders have less than a week to step forward and tell Revenue and Customs whether they have any unpaid tax owing:

Who do the new rules affect?

Anyone and everyone who is UK domiciled, has an offshore bank account and has not declared the income earned on the account.

What are the new rules and why now?

Revenue & Customs are clamping down on offshore bank accounts as part of a drive to recover an estimated £1.75bn of undeclared offshore income. The major banks including Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB have been forced to give details of 400,000 customers' offshore accounts. The Revenue has written to 200,000 of these because it was unable to identify the addresses of the other half.

However, under the Revenue-declared amnesty, all account holders have until 22 June to step forward and declare any unpaid tax.

What do I do to comply if the new rules affect me? What will I have to pay?

If you have any doubt about whether you have paid all due tax, go over all your income up to April 5 last year. If you find that there is unpaid tax, step forward and contact the Revenue. There will be no penalty if what you find adds up to less than £2,500 but you must still disclose it and pay the tax plus interest as usual.

For bigger sums declared within the amnesty, account holders will be expected to pay 10 per cent of what is owed instead of the usual 100 per cent. But you may be entered onto a Revenue "watch-list" of account holders to keep an eye on.

If you step forward by the amnesty deadline you must pay any tax owing by 26 November or face a harsher penalty. Tax inspectors may be willing to negotiate scheduled payments if payment of a one-off lump sum bill is too onerous.

What happens if I don't do anything?

If you hold an offshore account on which you owe tax and yet you do not step forward by June 22 the Revenue can impose stiff fines - or in the worst cases prosecute.

Anyone who fails to declare offshore income can expect to pay penalties of at least 30 per cent to 100 per cent of what they owe rather than the 10 per cent payable if you step forward before 22 June. The Revenue has vowed to cast its net as wide as possible to recover monies owed. Some taxpayers - and all tax evaders - are expected to have a lot of explaining to do as they may have to explain where the money comes from.

How many people have already come forward?

Latest estimates show that just 8,000 account holders - out of the 200,000 who have been contacted directly by the Revenue - have so far stepped forward. That's a miserable 4 per cent of the total. Tax experts are expecting a flood of late declarations but they also believe that a large number of account holders will not have stepped forward by Friday's deadline.

What is the Revenue going to do about account holders who do not come forward?

Hunt them down. After a legal ruling in February paved the way for the Revenue to demand that banks hand over the names and addresses for offshore accounts of UK customers with transaction details for six selected months over the past six years, it won't be too tricky.

At this stage the search is focused on customers of the big five UK banks but Revenue inspectors have said the search will affect all the 550 banks in the UK.

During the amnesty, tax inspectors are expecting to find information that will lead to accounts held with banks other than the big five.

However, to investigate further, the Revenue would have to persuade special commissioners - who hear determine appeals concerning Revenue decisions - to grant it power to demand the information from the other banks.

What are the implications for privacy laws?

Laywers have suggested that there is a risk for banks because institutions disclosing information relating to bank accounts would - in many jurisdictions - be exposed to civil claims for breach of duty of confidentiality.

Customers found to be evading tax are unlikely to find much sympathy in a court of law by claiming that their confidentiality has been breached.

However, the legal profession has suggested that aggrieved law-abiding account holders who are investigated by the Revenue might start legal proceedings.

Comments