Inland Revenue Broadens Tax Net On Offshore Trusts
According to a report in the Financial Times, tax advisors have learnt that the
UK's Inland Revenue is stepping up its campaign against inheritance tax avoidance
by using a broader interpretation of existing legislation to target offshore trusts.
Under this “dramatic new interpretation” of a section of the 1984
Inheritance Tax Act, law firm DLA warns that the Revenue has significantly broadened
the scope of legislation in a bid to catch financial institutions and advisors
who have referred clients to offshore trust companies or solicitors. Aileen Barry, national investigations director at DLA, believes that this will have
a substantial impact on the reporting requirements of banks, finance companies
and advisors, which may be compelled to examine client records to determine
whether records should be disclosed to the authorities. Furthermore, those who believe they have escaped the disclosure requirements
by transferring money to a trust already established by a non-domiciled individual
could also be affected by the new interpretation of Section 218 of the 1984
Act, the report stated. As a consequence, Ms Barry revealed that she is encouraging people who were
domiciled in the UK when they set up a trust to make a voluntary disclosure
to the Revenue. By taking this pre-emptive course of action, Barry explained that individuals
"would be in a better position to negotiate the amount due". The Revenue, which claims the interpretation of the 1984 legislation is nothing
new, has reportedly collected more than £11 million in additional revenues
through its special compliance office, since initiating a policy in 2003 to extract
more information from financial institutions concerning offshore trusts. A comprehensive report in our Intelligence Report series
with a country-by-country analysis of Offshore Investment Funds, Stock Exchanges and Trusts, with an analysis of the US QI Regime is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp
and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp .
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