HMRC renews efforts to target offshore account holders

Three cases reported earlier this week reveal that HM Revenue & Customs' drive to clamp down on tax evasion relating to offshore accounts is picking up speed. The effect of the cases is that three financial institutions will be required to produce the identities and addresses of thousands of UK resident customers.

Sue Holmes, head of national tax investigations at Smith & Williamson, the accountancy and financial services group, highlights key points coming out of the cases:

• It appears that HMRC already knows the identity of over 9,000 UK residents with offshore accounts at one of the institutions
• HMRC suggests that the total tax at stake could be as much as £83million, although estimates vary
• Tax disclosures, from account holders with a foreign associated company of one of the above institutions, made in response to the 2007 Offshore Disclosure Facility typically resulted in tax settlements of around £189,000 for each case and amounted to £400million in total.
• HMRC is also seeking information about offshore account holders from other UK financial institutions in its effort to clamp down on tax offenders
• HMRC has delayed the launch of its next New Disclosure Opportunity, as announced in the Budget, until autumn 2009 and it will continue until spring 2010. This delay appears to give HMRC time to obtain and analyse information obtained from a range of financial institutions making it potentially easier for HMRC to prosecute those who do not come forward in the 2009/10 round of disclosures.
• Taxpayers should recognise that if they hold an offshore bank account, a UK associated financial institution may need to provide the name and address of account holders who live in the UK to HMRC when required by a S20 notice.

Further background on the cases below:

Following the introduction of the new Tribunal system (formerly Special Commissioners), there has been a delay in publishing recent tax cases.

Sue Holmes, Smith & Williamson's head of national tax investigations said that three cases reported earlier this week reveal that HMRC's drive to access taxpayers' offshore account details has taken another significant and determined step forward. In Holmes' view there has merely been an administrative delay in publishing the detail of these cases which were heard in March of this year.

Holmes said that in all three cases, which were heard on the same day, the Judge presiding at the First Tier Tribunal was Dr John Avery Jones. All three cases were ex parte and the financial institutions have not as yet been named or identified. HMRC had sought consent from the Judge to issue TMA s20(8A) notices requiring the financial institutions concerned to produce details of the identities and addresses of UK resident customers.

Dr Avery Jones gave his consent to the issue of notices in all three cases.

Holmes believes it would appear that HMRC already knows the identity of at least 9,289 offshore account holding customers of one of the institutions and thus HMRC also sought consent for at least one institution to provide documents in connection with those accounts.

Ms Holmes advised that in making its case to the Judge, HMRC said that the institutions had branches in EU member states but, more importantly, the institutions either held information regarding the offshore account holders on their UK computerised systems, or the institutions had access to information held on computers outside of the UK (Jersey was one jurisdiction cited).

Holmes advised that one of the tests for production of data to HMRC is "possession or power" ie is such information required held in the UK or does a UK entity have the power to access this information from the UK, such as UK parent company with offshore branches.

Holmes stressed that holding an account with an offshore entity does not mean that details of the account cannot be disclosed to HMRC. Holmes added that HMRC is well aware of this point. Ms Holmes said that as part of its application, HMRC provided numerous exhibits to support its case. The Department estimated that the tax at stake was in the region of £18million to £83million.

According to HMRC, as part of the 2007 Offshore Disclosure Facility, it received disclosures from a number of people who held accounts with an associated company of one of these institutions. These disclosures resulted in an average tax settlement amounting to £189,000 for each case.

HMRC is understood to be seeking similar information from significant numbers of other UK financial institutions in its continued effort to clamp down on tax offenders.

HMRC is about to launch a ‘New Disclosure Opportunity' which is planned to run from the Autumn for six months until the Spring of 2010. This delay in launching the Opportunity appears to provide HMRC officers sufficient time to obtain information from the financial institutions which were involved in the recent cases besides giving time to get information from other financial institutions. Moreover, this delay should also allow HMRC officers time to interrogate the data and then possibly seek to prosecute offenders who do not come forward under the second opportunity to disclose their offshore income.

For further information contact:
Sue Holmes, head of tax investigations at Smith & Williamson, the accountancy and financial services group, mobile 07866 544946

PR enquiries
Kate Harrison, 020 7131 4228

Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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