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HMRC To Force Banks To Disclose Offshore Accounts

by Robin Pligrim, LawAndTax-News.com, London

24 May 2009


HM Revenue and Customs (HMRC) is to apply for a blanket order that would legally compel all 500 banks with a presence in the UK to hand over details of customers with offshore accounts.

HMRC will make an application to the Tax Tribunal in the coming weeks after recently winning a set of legal rulings that will require four banks with operations in Austria, Belgium, Luxembourg and the Channel Islands to disclose customer details. The names of the institutions concerned have not yet been published.

While a ‘class action’ of this type is unprecedented, using this tactic will dispense with the need for HMRC to apply for orders on a piecemeal basis, thus saving it and the Tribunals Service much time and effort. The department is also expected to argue that the amount of tax revenue at risk justifies the move.

According to accountants Smith and Williamson, HMRC already knows the identity of over 9,000 UK residents with offshore accounts at one institution. Although estimates vary, the resulting tax at stake could be as much as GBP83m. However, the department expects to collect as much as GBP2bn as a result of the latest crackdown on offshore bank accounts, says PricewaterhouseCoopers.

The Revenue forced five High Street banks to provide details of offshore account holders shortly before a partial ‘amnesty’ in 2007, an initiative which yielded some GBP400m in additional tax revenues.

The government announced in the last budget that a similar scheme, dubbed the ‘New Disclosure Opportunity,’ or NDO for short, would commence in the autumn of 2009 and run through to the spring of 2010. In the meantime, HMRC is expected to sift through the bank account data handed over by the banks and target those who do not come forward during the amnesty for investigation. These individuals will almost inevitably face higher penalties and a greater prospect of criminal prosecution.

“Now is a critical time for anyone with undeclared funds in an offshore account or undeclared income from offshore assets, to take stock of their situation and ‘come clean’, if they are to minimise the costs and other consequences of their mistakes," warns Stephen Camm, tax partner, PricewaterhouseCoopers. "There will be no more chances.”

Under the 2007 amnesty, known as the Offshore Disclosure Facility, undisclosed tax liabilities were subject to a maximum penalty of 10% of the outstanding tax. Normally, penalties of at least 30% and possibly as much as 100% can be imposed. The government will publish details of the New Disclosure Opportunity later this year.

A comprehensive report in our Intelligence Report series examining in depth the situation of offshore transparency and secrecy in a number of the most prominent jurisdictions., is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report2.asp

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