HMRC Continues Offensive Against Offshore Accounts

by Jason Gorringe, Tax-News.com, London

13 January 2006

The UK's HM Revenue and Customs is following in the footsteps of the IRS in pursuing the holders of illicit offshore bank accounts through their domestic banks and credit cards.

HMRC has been requesting information from banks with UK customers holding offshore accounts or credit/debit cards, and it is understood that several hundred thousand documents have been received in return.

Some banks have been reluctant to supply the information, but the results of a case decided this week by the special commissioners' tax tribunal will leave them little choice. A well-known high street bank, unnamed in the proceedings, had tried to argue that the Revenue's request for information was incompatible with the Human Rights Act, a claim the commissioner, John Avery Jones, rejected. He noted that analysis of a sample of offshore customers suggested that many of them failed to declare interest income, and that HMRC's request therefore did not amount a 'fishing' expedition.

Armed with this decision, the department will be able to serve formal notices on the bank in question requesting information about its customers' offshore accounts under section 20 of the 1970 Taxes Management Act.

According to the Financial Times, thousands of the bank's offshore account holders will now be "invited" to reveal details of their deposits. The paper says that HMRC expects a yield of nearly GBP350m from the operation, which it is likely to extend to other financial institutions.

HMRC is also targetting credit card holders, and last June was reported to have asked UK credit card providers to provide it with the credit and debit card details of around 30,000 people on a specially compiled 'hit-list'.

Once it has identified that an individual has an offshore bank account, HMRC writes to ask the person to explain why no tax is due. Chiltern tax consultants says that HMRC is using a heavy-handed approach, but HMRC said it had written to only 500 people, and that anyone resident in the UK should know that their income is taxable there.

In the US, the IRS began using credit card records to attack offshore account holders nearly five years ago, and obtained a string of court orders compelling the credit card companies to divulge lists of card holders.

Last year the IRS announced an amnesty for US citizens who had used offshore credit cards and bank accounts to conceal assets for the purposes of tax evasion. They were able to avoid criminal charges if they came forward before April 15.

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