After netting around £450m of undeclared tax from 44,000 people through its investigations last year with five of the UK’s top retail banks, the Revenue is hungry for more and is now understood to be targeting 25 building societies and foreign banks with UK operations as part of a wider probe on undeclared taxes held offshore.
Last April HMRC launched an offshore disclosure facility enabling investors with offshore accounts to disclose previously undeclared tax due on income and gains for a capped penalty of 10 per cent. As well as following up on declarations that were rejected under this facility for being incomplete or on suspicion that they were factually inaccurate, HMRC is now beginning a second sweep on offshore banking operations.
In a compliance reform forum update sent to accountants this week, HMRC said its objective will be to: “obtain information from a second range of financial institutions, using the same legal powers as were applied to the first five banks.”
“The intention of the new facility will be to provide an opportunity for account holders to inform us of their own accord of any unpaid tax or duties and to settle their debts in a similar way to the original offshore disclosure facility.”
PwC tax partner Stephen Camm says HMRC’s new tax probe is likely to affect around 500 UK banks with offshore connections and says the outcome is likely to be far more fruitful in monetary terms than last year’s patrol. He says: “The customer base of some of the smaller banks is very wealthy and different to some of the UK banks so the Revenue’s expectation is likely to be significantly bigger – the potential is in billions.”
Hiccups are undoubtedly going to crop up along the way as some organisations attempt to hinder free information disclosure but according to Camm the Revenue is not afraid to flex its muscles through the courts and is likely to compel the UK arms of these organisations to provide the information.
In other offshore news this week, the Isle of Man government said its recent meeting with Lord Chancellor Jack Straw to discuss relations with the UK was “positive and reassuring.” Unfortunately the details of their “helpful discussions” regarding Kaupthing Singer Friedlander IOM are no clearer for offshore bond holders and are likely to remain so until the official winding up of the company on November 27.