HM Revenue & Customs (HMRC) remains determined to clampdown on any UK resident taxpayer using offshore tax havens to hide undisclosed assets and its efforts appear to closely follow those of its German counterparts.
In January 2006, the German finance ministry paid a former employee of a Liechtenstein bank, LGT, €4.2Million for data on German citizens holding accounts in Liechtenstein. German prosecutors have recently confirmed that they have commenced tax-evasion investigations into 966 individuals discovered to have accounts in Liechtenstein. The first suspect charged in Germany has now been successfully prosecuted and ordered to give €7.5m to charities and the state.
It has been reported that HMRC was offered similar data on UK taxpayers, but initially this offer was refused. However, when HMRC saw the success that Germany had had with the data, it quickly changed its mind! In February 2008, HMRC admitted to paying £100,000 for the data, but claimed it would recoup £100m in unpaid taxes from UK resident taxpayers.
In July 2008, Dave Hartnett, the outgoing chairman of HMRC, confirmed that it held information on some 300 UK taxpayers with bank accounts in Liechtenstein, which included professional investors and writers and featured some ‘household names’. These taxpayers are reported to have been hiding more than £1Billion in deposits and interest. Hartnett warned that HMRC hoped to start its first prosecution relating to the offshore data within months. Realistically, however, only the most serious cases will be considered for prosecution.
HMRC is keen to collate and interrogate as much information relating to offshore accounts as it can including UK taxpayers using other tax havens. In addition to using their own information powers, HMRC is reportedly exploring the possibility of obtaining information from the German authorities by taking advantage of a recently signed tax treaty between Germany and Switzerland, which prevents the traditional right to secrecy from applying in certain circumstances. This could allow documents to be obtained in cases of fraudulent behaviour punishable by imprisonment. This tactic is further evidence of HMRC’s voracious appetite for information and the lengths to which it will go to obtain it. Will banking secrecy laws become a thing of the past?
Taxpayers with undisclosed offshore assets can take proactive steps to bring their tax affairs up-to-date by making disclosures to HMRC. It is extremely important, however, to manage the disclosure process in such a way as to minimise the risk of potential prosecution or greater financial penalties. Practitioners and taxpayers should seek specialist professional advice in this area.
For more information, please contact Gary Rowson by completing the online form below.