Jersey Business Braces Itself For Increasing Scrutiny From IR

by Jason Gorringe, Tax-News.com, London

08 May 2003

Trust and company businesses in Jersey should brace themselves for a perceptible increase in requests from the UK Inland Revenue in the near future, warned KPMG tax partner John Riva at an island seminar last week.

The warning comes at a time when mainland tax authorities are showing an increasing interest in their residents' banking activities in the Channel Islands. Last month, the Bank of Ireland wrote to around 400 customers with accounts at its Jersey branch warning that the Revenue Commissioners will be looking into their accounts in June to ascertain whether they have evaded Irish taxes.

Last year, the BoI revealed information about Jersey-based trusts to the Inland Revenue under section 218 of the Inheritance Tax Act. At the time, it was thought to be a mere one-off routine request, but Riva believes the IR sees the case as a precedent, and could lead the way to a glut of similar cases in the future.

A recent report by the National Audit Office said the Special Compliance Office of the IR considered the offshore sector a particular risk, and in his recent budget, Chancellor Gordon Brown set aside £66 million targeted at stepping up the Revenue's fight against tax evasion.

According to the JEP, UK solicitor Jason Collins believes Jersey's Royal Court will come under increasing pressure to cooperate with tax crime investigations. Though the UK courts have no jurisdiction in Jersey, money laundering rules put in place four years ago allow the UK government to apply to the Jersey court for assets connected with tax crime to be seized.

The JEP has also discovered that there is a particular focus within IR Special Compliance division on wealthy individuals, and that specialist teams around the UK were amassing intelligence on a number of individuals with domicile issues, high amounts of foreign trust income and considerable portfolios of property investments.

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