Report Warns On Implications Of UK Revenue's Offshore Fraud Project

by Jason Gorringe, Tax-News.com, London

19 August 2005

According to an Isle of Man Today report, experts on the Island are concerned that the crackdown currently being undertaken by the UK's HM Revenue and Customs may cancel out the withholding tax concession won by the Manx government with regard to the European Savings Tax Directive.

Earlier this month, HMRC began writing to offshore account holders in the UK, asking them to explain why no tax was due on the assets held in their accounts.

In its report, the Isle of Man Today suggested that:

"The actions of the UK revenue are in conflict with the recently introduced ESTD. It allows UK resident individuals to keep account information from HM Revenue and Customs in exchange for payment of a withholding tax of 15 percent of their savings interest."

"The UK government is using information gained from unknown sources to force offshore account holders to provide account details. If it continues this policy, it may render the option of paying withholding tax to protect personal savings information useless."

However, KPMG senior tax manager, Paul Hotchkiss suggested that for the UK tax authority, the two issues were separate.

"At the end of the day there is an obligation in the UK to report your worldwide income. You might be opting for withholding tax, but that doesn't mean to say the obligation doesn't apply," he told the Manx newspaper.

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