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Advisors Urge Offshore Savers To Take HMRC's Carrot

by Robert Lee,, London

15 June 2007

Business advisors KPMG have warned taxpayers with offshore bank accounts that they are unlikely to escape scrutiny from tax inspectors if they fail to disclose under HM Revenue and Customs's offshore bank account amnesty.

KPMG's warning comes after it emerged that of the estimated 400,000 bank accounts identified by HMRC as part of its offshore tax avoidance crackdown, only about 4,300 offshore account holders have come forward, according to a report in the Financial Times last week.

Under the Offshore Disclosure Facility (ODF), undisclosed tax liabilities will be subject to a maximum penalty of 10% of the outstanding tax (in addition to paying the total tax and interest due). Outside of the ODF, penalties of at least 30% and possibly as much as 100% can be imposed.

Reg Day, KPMG’s National Director Tax Investigations, observed that: “It’s difficult to fathom why so few people have so far come forward to register for the ODF. It may be that there is a ‘herd’ mentality operating here and people are under the impression that there is safety in numbers - if they hide in the crowd HMRC won’t be able to get them – or they believe they are ‘small fry’ (even when quite large sums of money are involved) and, as such, HMRC won’t be interested in them. Failing to step forward is a very dangerous gamble. HMRC will work through the list and the vast majority on it can expect to be contacted sooner or later.”

KPMG believes that HMRC will approach people whose details they hold in order of priority and on the basis of whose details they have held for the longest period of time. There are likely to be a small number of prosecutions, KPMG predicted. People who, in HMRC’s opinion, owe in excess of GBP500,000 of unpaid tax will be dealt with by the national “Special Civil Investigations” team. The majority will be dealt with under HMRC’s “Civil Investigation of Fraud” (CIF) procedure. Those who HMRC believe owe between GBP75,000 and GBP500,000 in undisclosed tax will receive the attentions of HMRC’s Civil Investigation of Fraud teams, again using CIF procedure. Those who HMRC believes have undisclosed tax of less than GBP75,000 will be dealt with by their local tax offices, which will raise enquiries into their previous tax returns.

KPMG expects these investigations to commence relatively shortly following the 22 June deadline for registering for the ODF – probably around the middle of July. However, it may be some time before they are actually contacted – possibly up to five years.

Reg Day said: “Those people with offshore interests who have not come forward under the ODF need to understand that it is not a question of if they will be the subject of HMRC scrutiny but when. Registering for the ODF seems to us to be a ‘no-brainer’ – you are guaranteed a fixed penalty which is lower than you will receive when HMRC catch up with you and you avoid years of sleepless nights and looking over your shoulder.”

The deadline for registering for the ODF is Friday 22 June 2007. Outstanding tax must then be declared and paid by 26 November 2007.

KPMG has set up a national helpline to assist anyone who would like further information regarding the disclosure facility.

A comprehensive report in our Intelligence Report series examining offshore confidentiality is available in the Lowtax Library at and a description of the report can be seen at

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