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HMRC Offshore Crackdown Prompts Warning From IoM Finance

by Carla Johnson, Investors, London

27 September 2007

Following the recent announcement by the UK's HM Revenue and Customs that it will be further pursuing UK taxpayers with undeclared offshore accounts, Isle of Man Finance has urged those affected to get urgent tax advice.

Speaking to the IFAOnline news service, a spokesman for Isle of Man Finance explained that:

“The Isle of Man Government is aware of this situation and recommends that clients make themselves aware of their tax position and if necessary seek professional tax advice, similarly that the Island’s banks strongly recommend that their clients seek professional tax advice.”

The UK tax authority recently called a meeting with 170 banks, brokers and wealth managers, as it prepares to unleash its investigative forces against the 400,000 holders of offshore accounts who have not declared income to the tax department.

According to a report in the Financial Times, HMRC convened the meeting to explore how much confidential information the banks and other financial institutions would be prepared to disclose about their clients to the Revenue during the course of its ongoing crackdown against offshore tax evasion.

HMRC was expected to turn its attention to private banks and wealth managers, after it successfully forced the major UK high street banks including Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB to disclose details of their customers' offshore accounts.

HMRC had hoped to flush out many of the suspected holders of accounts with undeclared money in an amnesty earlier this year. However, this was not nearly as successful as the tax authority would have liked, with only 50,000 individuals choosing to take advantage of the so-called Offshore Disclosure Facility, which capped penalties at 10% of any unpaid tax for successful applicants. This leaves the Treasury with the onerous and costly task of pursuing the remaining 350,000, many of whom no doubt live in foreign countries.

Nevertheless, HMRC has already selected many account holders for investigation, and the first prosecutions are likely to take place next year. Some tax experts are also expecting HMRC to sift its way through the entire pile of 400,000 accounts, even if it takes several years.

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