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HM Revenue & Customs search offshore accounts for missing taxes

Posted: 08 August 2008

The purchase of wealthy Liechtenstein account holders details by UK and
German tax authorities has raised interest in the use of offshore
accounts and the measures authorities are taking to prevent misuse. In addition, HMRC is understood to be launching a new probe into offshore account holders by sending out disclosure requests to 25 foreign banks to provide details of UK account holders.

Grant Thornton increased cooperation between worldwide tax authorities and an aggressive drive by Her Majesty's Customs and Revenue (HMRC) to gain access to offshore accounts for the purpose of clamping down on perceived tax evasion is likely to be a concern for individuals with offshore accounts.

Other measures in the drive to clamp down on perceived tax evasion that will have individuals thinking twice about sending money offshore include a recent tax treaty between Germany, Britain's EU partner, and Switzerland to enable a ‘back-door' route into Swiss bank accounts and last year's offshore disclosure initiative which netted £400 million.

Gary Ashford, a tax investigations director at Grant Thornton, says, "The Treasury has been progressively tightening the net on offshore accounts for some time and it is now getting to a point that those with money held offshore, whether acting rightly or wrongly, are likely to feel some heat from HMRC in the near future."

"HMRC is using any means possible to get hold of information on offshore accounts. Whether it be paying for information, pressuring private banks to hand over details or teaming up with other tax authorities and information sharing, HMRC is determined to gain access to these accounts. It is looking increasingly likely that HMRC will consider introducing another facility for those holding untaxed offshore assets, particularly in offshore bank accounts, to disclose these to HMRC and pay any tax owed."

Ashford says that HMRC is continuing to development its approach of selecting taxpayers for investigation on a "risk score" basis and it is important to appreciate how any offshore arrangements impact on an individual's overall risk score.

"HMRC clearly see anything involving offshore arrangements as increasing your risk score. However, if an individual is aware of this they can then set about ensuring any offshore arrangements are fully tax compliant. If problems are identified in the robustness of any arrangements they should be disclosed to HMRC at the earliest opportunity as HMRC has stated it will look to prosecute cases that have not been disclosed."

Chris Mills, director of Grant Thornton's Private client team, believes that while HMRC is justified in its pursuit of tax evaders, its push into offshore jurisdictions has the potential to strip offshore banking facilities of their ability to operate on a level playing field in respect of legitimate account holders.

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