Offshore Onshore Mag

* Offshore tax dodgers face crackdown







"Up to 65,000 customers of the five high street banks did not take up HMRC's offer"

"If such a person refuses to pay the liabilities due, HMRC can impose a charge over the property"The rattle of the post box is usually a pleasure this time of year as Christmas cards arrive from nearest and dearest and from those not seen for a while.

However for some, the post is less likely to bring such glad tidings.

Any day now, Her Majesty's Revenue and Customs (HMRC) will be getting in touch with people who they believe should have come forward under the "offshore disclosure facility" (ODF) and didn't.

Earlier this year, HMRC obtained details of around 400,000 offshore bank accounts in the Channel Islands, the Isle of Man, the Republic of Ireland, Gibraltar and Cyprus.

Five high street banks were compelled to hand over information about their customers.

HMRC estimated that around 100,000 of these account holders had unpaid tax outstanding.

Confessions

In order to encourage miscreants to come forward, HMRC unveiled the scheme under which taxpayers could "come clean" in return for a guaranteed and reduced fixed penalty.

So how many people chose not to confess?

HMRC have said that 62,000 people came forward under the ODF.

This would suggest that about 38,000 account holders have reason to scan their doormats anxiously, but the figure is likely to be far higher than this.

Among those people who requested our assistance through the ODF, 45% were in fact customers of other financial institutions, who have not yet been compelled to hand over information to HMRC.

So if our experience is typical, this would suggest that up to 65,000 customers of the five high street banks did not take up HMRC's offer.

Assessing cases

Now HMRC will be categorising them as low or high risk and then dealing with the cases according to various risk criteria, likely to include how much outstanding tax they estimate is owing.

The risk assessment team will review all of the information available and this extends way beyond a simple list of accounts.

In some cases, the Revenue has had access to bank statements for a sample of six months.

The statements may reflect transactions involving other bank accounts which have not been disclosed, or receipts and payments from offshore companies or trusts of which HMRC have no prior knowledge.

The authorities will also look at details of debit and credit cards linked to offshore bank accounts, some of which were in the names of offshore companies with the debit or credit card in the name of a UK-based beneficial owner.

Plenty of information

Other information available to HMRC to consider as part of the risk assessment includes:

    * money-laundering reports from banks, solicitors, accountants and the like
    * routine exchange of information with overseas tax authorities, including details of property held overseas or details of overseas savings income exchanged under the EU Savings Directive
    * land registry entries showing UK property and land transactions involving offshore companies
    * data from Companies' House showing details of UK companies owned wholly or partly by offshore companies and trusts established in offshore centres.

HMRC will cross reference account holders' details with all these other data sources, looking for links, and they will then categorise accordingly:

    * potential loss of tax less than £75,000 - enquiry conducted by an inspector in a local area office
    * incorrect returns and a potential loss of tax greater than £75,000 - Civil Investigation of Fraud investigation under Code of Practice 9
    * if the target is a UK resident but non-domiciled individual, and no tax returns have been submitted, the case could be referred to Special Civil Investigations to open an investigation under Code of Practice 8
    * in the most serious of cases, HMRC may seek to launch criminal prosecutions.

Paying up

When it comes to punishment, an important factor will be whether the taxpayer has made a complete and unprompted disclosure of the offences committed.

However, this let-out may not apply if the motivation for making the disclosure is that HMRC are about to discover the evasion.

Account holders who have not come forward under the ODF, and whose circumstances fall within the criminal prosecution criteria, will therefore be in some difficulty.

Their affairs will require very careful handling should they decide to make a disclosure or be contacted by HMRC.

There is mitigation for penalties, depending upon co-operation with the authorities, disclosure and the seriousness of the offence.

HMRC will expect the full liability to be paid but, in some circumstances, may give someone time to pay, but with an additional interest charge.

In seeking recovery of liabilities, HMRC take circumstances into account.

For example, they do not really want to make people homeless, but conversely, they will not be too sympathetic where a taxpayer owes, say, £100,000 and has a mansion worth £2m with no mortgage.

If such a person refuses to pay the liabilities due, HMRC can impose a charge over the property.