Following its announcement in the 2009 Budget that there will be a second and ‘final’ chance for people to disclose any undeclared income arising from offshore bank accounts (“New Disclosure Opportunity – Final chance to disclose” article of 13 May 09), HM Revenue & Customs (HMRC) is hoping to strengthen its position by obtaining a ‘blanket’ information notice to serve on the financial institutions it believes hold information, that will be key to the success of the New Disclosure Opportunity (NDO).
As part of its Offshore Disclosure Facility (ODF) in 2007, HMRC successfully obtained notices requiring five high street banks to provide documents containing information about their UK customers holding offshore accounts. Similar information is now being sought from other institutions and HMRC hopes that this will help persuade taxpayers to participate in the NDO.
HMRC’s intention to apply for one formal notice to cover all financial institutions will inevitably be met with strong resistance from the financial institutions themselves, who are likely to argue that their characteristics, the types of customers involved and the types of accounts held are so varied that a single notice cannot realistically be used. HMRC, however, will be buoyed by its success earlier this year in obtaining notices under Section 20(8A) Taxes Management Act (TMA) 1970 against four financial institutions. These notices require the financial institutions concerned to provide details of those customers with UK addresses who hold non-UK bank accounts.
Section 20(8A) TMA 1970 allows a formal notice to be served on a third party in respect of “a class of taxpayers whose individual identities are not so known” (in this case ‘account holders’). In the recent applications (Applications to serve Section 20 TMA 1970 Notices on Financial Institutions No’s 5, 6, 7 & 8) HMRC argued that during the ODF, a number of the banks’ customers or their associated companies made disclosures of significant amounts of undeclared tax. Based on the levels of disclosures made, HMRC estimated the potential tax yield it believed might be obtained if further notices were issued, and this appears to have been a powerful factor in influencing the Special Commissioner’s decision. He accepted HMRC’s arguments that there were reasonable grounds for believing that any of the class of taxpayers to whom the notice relates may have failed to comply with their tax obligations, and so approved the issue of the notices.
HMRC will no doubt feel it is in a position of strength as it prepares its application for a ‘one size fits all’ information notice. However, its recent successes were effectively under the ‘old procedures’. From 1 April 2009, HMRC was given new information powers and the Special Commissioners have been replaced by the new Tax Tribunal (“Tax Appeals – a new era” article of 1 April 09) so it will be interesting to see how any future requests by HMRC are interpreted and decided.
The NDO is not due to be formally launched until late 2009. However, the opportunities for making voluntary approaches to HMRC before then to disclose any undeclared tax liabilities still exist, and it may be possible, under certain circumstances, to argue that any potential penalties are ‘capped’ at the levels to be offered by the NDO (which are expected to be lower than would otherwise normally be the case). Taxpayers are strongly advised to seek specialist help in this area.
For further information on any of the points discussed above, please contact your usual Vantis Client Partner or call either Mark Ayre or Gary Rowson on +44 (0) 207 417 0417. Alternatively, you can complete and submit the online form below.