Wake Up Call For Tax Evaders


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Countries across Europe have been stepping up their fight against tax evasion in order to make sure they receive all monies due from their taxpayers, including on capital held abroad.

Countries across Europe have been stepping up their fight against tax evasion in order to make sure they receive all monies due from their taxpayers, including on capital held abroad. While European efforts against hidden offshore assets go back well over 10 years, the international crackdown intensified after the financial crisis hit in 2008, with the G20 declaring war on tax havens and banking secrecy.

Local tax authorities have been receiving increasing amounts of information on offshore bank accounts over recent years, and from a variety of sources including, controversially, stolen client data. Countries like the UK, Spain, France and Germany have been using the data to track down tax evaders and start to collect unpaid tax.

Now HM Revenue & Customs has had its most successful prosecution to date. A millionaire property developer from Berkshire, Michael Shanly, has been found guilty of using an undisclosed Swiss bank account to evade tax, and has been made to pay around ?830,000 as a result.

The back tax amounted to ?430,000, but on top of this he had to pay ?400,000 in penalties and costs.

HMRC commented: “He thought [the bank account] was out of reach of HMRC and hoped we would never find it. However, we discovered it, and he will pay a heavy penalty“.

Choosing not to declare offshore assets is very high risk these days, and this case is a lesson of what can ? and does ? go wrong. In some cases it can also include a prison sentence. Even if you somehow get away with it, your heirs will be left to face the consequences when they inherit your money. Blevins Franks believes that tax planning is an important part of protecting your wealth, and only recommends compliant and approved tax mitigation strategies. We take both the UK and local rules of your country of residence into consideration when making our recommendations.

The UK revenue pointed out that it had offered disclosure facilities in 2008 and 2010, where people with undeclared offshore assets could come forward and pay the tax due in return for leniency over penalties. Shanly did not take up either opportunity.

HMRC confirmed that Shanly?s Swiss bank account was discovered when it received information about UK taxpayers with HSBC Geneva accounts in 2010.

The data had been stolen by a former employee of HSBC Geneva and handed over to the French tax authorities, who in turn passed the names of UK taxpayers over to their British counterparts. This is part of the routine exchange of information we are seeing across Europe these days.

It is believed that there were 6,000 British names on the list and last year HMRC wrote to 1,000 of them, offering them an opportunity to come forward and disclose their tax liabilities.

HMRC has been waiting for a successful high profile tax evasion case to draw attention to the consequences of hiding money offshore. Shanly may not be as high profile as football manager Harry Rednapp, who was unsuccessfully tried earlier this year, but he is a successful businessman who features on the Sunday Times Rich List.

This is not just a one-off warning to other tax evaders; Shanly is likely to just be the first on a list of court cases. An HMRC statement confirmed that its criminal investigators are continuing to review the information they have already received and that further prosecutions are likely. It receives information from various sources and works with partner agencies in the UK and abroad.

David Gauke, Exchequer Secretary to the Treasury, said that the case ?proves that the Government will track down and take action against those who try to get out of paying the tax they owe?. He added: ?The message is clear: even if you try to hide money abroad, HMRC will find you.?

This is a common message around Europe. France introduced new controls on tax evasion earlier this year. German and French tax authorities have launched raids into Swiss bank clients and employees as part of their crackdown. They have both benefited from stolen client data, as has Spain. It is believed that 3,000 Spanish taxpayers were on the HSBC Geneva list. Last year it was reported that Spain had already collected ?300m as a result, with some people choosing to come forward voluntarily.

Spain has also now launched a ?voluntary disclosure facility? which is running until November. Taxpayers will only need to pay a one-off 10% levy on the value of all their undeclared assets. The government has promised to get tough on anyone who does not take this opportunity to regularise hidden offshore assets, and the UK case is an example of what the consequences can be.

Tax planning has become something of minefield over recent years. It is often still possible to successfully lower your tax liabilities on your savings, investments, wealth and estate, but you do need to take professional advice from an experienced international tax advisory firm like Blevins Franks. They keep on top of all the frequent changes in tax regulations to ensure your tax planning is both as effective as it can be and fully legitimate.

19th July 2012

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.