Banging On The Doors Of Tax Cheats


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The UK continues to lead the way in the fight against offshore tax evasion. HM Revenue & Customs has been clawing back millions of pounds of unpaid tax for the Treasury, launching criminal in

The UK continues to lead the way in the fight against offshore tax evasion. HM Revenue & Customs has been clawing back millions of pounds of unpaid tax for the Treasury, launching criminal investigations and civil cases against tax evaders, promising more investigations and implementing cutting edge technology. Other tax authorities in Europe will be watching and learning.

According to reports in The Sunday Times on 5th June, HMRC has identified 500,000 British taxpayers who are suspected of failing to declare their offshore bank accounts. They face ?severe penalties if found to be tax evading.?

HMRC inspectors have apparently been ?genuinely surprised? by just how many middle-class people have hidden funds in offshore centres. It is not just the very wealthy who use offshore accounts to escape paying tax, with an HRMC spokesman saying: ?We have started banging on the doors of offshore cheats, who come from a broad sector of society.?

Over recent years the government has forced UK banks to hand over information on their offshore customers and has launched tax ?amnesties? aimed at offshore account holders, 2007?s Offshore Disclosure Facility (ODF) and 2009?s New Disclosure Opportunity (NDO). These facilities gave taxpayers the opportunity to regularise their accounts in return for lower penalties, but it did not give them protection from prosecution.

It is these HMRC measures which provided many of the 500,000 names on its list of potential offshore tax evaders.

The coalition government has since allocated close to ?1 billion to catch tax cheats and HMRC now has a dedicated team focusing on offshore bank accounts. New penalties for offshore tax evasion were introduced in April and the maximum fine is now 200% of the unpaid tax, in addition to repaying the tax owed. Those found guilty of tax evasion could be publicly named and shamed.

HMRC has also benefited from whistleblowers, with 7,000 names on its list provided by an ex-employee of a Swiss bank.

Herve Falciani was an IT expert at HSBC?s Geneva branch. After falling out with the bank he handed the French authorities a disc containing data of 79,000 clients from 180 countries, including identities and bank account details. As part of the information sharing we are now seeing between European countries, the French passed the disc on to several tax authorities across Europe who are using it to investigate tax evasion, including the UK, Spain, Italy and Belgium.

The UK revenue received 7,000 names of potential tax evaders. Between them they are said to have assets worth ?13 billion and HMRC expects to receive tens of millions of pounds from these accounts.

The Spanish authorities reportedly looked into 3,000 HSBC accounts after receiving their list and have collected around ?300 million so far as a result.

The ODF and NDO have earned the UK government ?485 million, from over 50,000 voluntary disclosures. 3,000 ongoing enquires will further increase the tax take.

HMRC has recently launched its first 10 criminal investigations for offshore tax evasion, as well as hundreds of civil cases.

Chris Harrison, HMRC Criminal Investigations deputy director, said: ?We are confident that these and more cases will be taken forward in future. This is proof of HMRC?s determination to increase the number of prosecutions we take forward in all areas ? we are committed to ensuring everyone pays what they owe.?

Offshore investigations can be very lucrative for governments. For example, it was reported that HMRC recently netted ?1 million in tax and penalties from just one person who had been using offshore banks to hide assets from the taxman.

Besides the two offshore facilities, HMRC?s Tax Health Plan aimed at medical professionals has raised ?10,000 from 1,500 voluntary disclosures and resulted in six criminal investigations. Another 500 cases are being pursued.

It also launched the Plumbers Tax Safe Plan offering lower penalties for those disclosing their tax affairs and is slowly targeting various other trades. Restaurants, private tutors/coaches, online traders and tradesmen have been named.

The Revenue also now has a new IT system which trawls through the web looking for inconsistencies between wealth and declared income. It examines factors like pay, bank interest and property income, as well as lifestyle indicators, to detect anomalies between where people live, their lifestyles, and how much tax they are paying. While most of us would consider this very intrusive, HMRC clearly has no qualms about it.

HMRC?s Liechtenstein Disclosure Facility (LDF) is also still ongoing and steps up a gear later this year. Under the agreement with Liechtenstein, by October all banks in Liechtenstein must contact their customers to establish if they have links to the UK. Where they do, they must either show that they are already UK tax compliant or disclose their account through the LDF within 18 months of initial contact. If they fail to do, the bank must close their account.

HMRC is confident that its tax evasion crackdown will raise billions of pounds, both from collecting the unpaid tax and interest penalties. With governments throughout Europe in need of extra tax revenue, I would not be surprised if they adopted similar measures to collect unpaid tax in future. It is often still possible to lower your tax bill on your savings, investments, pensions and estate, but you do need to get professional advice from a firm like Blevins Franks to ensure you get it right.


By Bill Blevins, Managing Director, Blevins Franks

30th June 2011

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.