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HMRC set to increase powers

04 January 2010

It pays with any Government announcement to look below the headline grabbers and there you will find the devil in the detail. The recent pre budget report is no different. Slipped in under the heading of offshore tax evasion, is reference to a consultation document that will give HMRC the right to request the disclosure of certain new bank accounts opened offshore.

The opening of a bank account, offshore or otherwise, is not necessarily the initial step into a career in tax evasion. The fact that HMRC are looking to obtain the rights to make UK taxpayers disclose when they have opened certain offshore accounts, looks to be a significant increase in their powers to pry into the lives of the public.

The first and obvious question to ask is which accounts will they want disclosures about?

It is likely that any country on the grey or the black list of the OECD will be an automatic trigger for disclosure, but what about the Channel Islands or Switzerland? These countries appear on the white list and have recently entered into Tax Information Exchange Agreements. In the notes to the pre budget review it would seem likely that HMRC will not require people to disclose a new account in these jurisdictions. HMRC will expect people to disclose new accounts opened in countries where no TIEA exist, subject to an aggregate de minimis threshold of £25,000.

This may also include people who have closed an account in Liechtenstein since the 10 August 2009 and with the closing funds opened a further account in other jurisdictions. This is a wide definition but the one obvious flaw in the recent Memorandum of Understanding between Liechtenstein and the UK, is that up until 31 March 2015 people can close their bank accounts in Liechtenstein and move the funds elsewhere. This will enable them to avoid having to make a disclosure to HMRC under the Liechtenstein Disclosure Facility (LDF).

So what a very clever way to shut off this particular loophole by making that very act something that has to be disclosed. Whilst many people may do this and ignore the potential consequences it does tighten the net on those bent on tax evasion. And when HMRC catch up with those evading their taxes the level of penalty could be as much as twice the tax avoided.

This coupled with the fact that HMRC are going to start enquiries into people with offshore accounts from January 2010, means the focus really is getting sharper on overseas assets. Those who do have something to disclose should seriously consider the two disclosure opportunities available at the moment. The New Disclosure Opportunity (NDO) which ends today (4 January 2010) and the LDF. If they qualify, the LDF would appear to be the opportunity of a lifetime in the current climate.

Having helped a number of clients register for the LDF already we are well placed to advise and help people who may need to follow a similar route. Jeff Millington can be contacted on 0121 452 1515 or by email jeff.millington@btg-tax.com.

Author: Jeff Millington

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