y Bill Blevins [email protected]
Bill Blevins is Managing Director of Blevins Franks. He has specialised in expatriate investment and tax planning for over 35 years. He has written books and gives lectures on this subject in Southern Europe and the UK.
More than 200 “extremely wealthy” UK taxpayers suspected of “heavy-duty” tax evasion amounting to “millions of pounds” have been sent letters related to serious cases of tax fraud from HM Revenue & Customs (HMRC).
The letters were sent under Code Practice 9 (COP9), inviting the recipient to a meeting with HMRC to make a full disclosure of all tax irregularities and advising them to appoint a professional adviser.
An HMRC spokesman said: “This is part of our drive against tax evasion. The days of hiding money offshore to evade tax are now over.”
According to the Financial Times, another source close to the investigation commented: “These are people who have already been given the chance to come forward. Our evidence suggests this is heavy-duty tax evasion. These are extremely wealthy people and we are talking about large sums of money, many millions of pounds.”
The account holders have been under investigation since earlier in the year for holding undeclared funds in offshore banks. Most of the accounts are thought to be in private bank HSBC Holdings in Geneva from where information affecting 15,000 suspected high net worth tax evaders was stolen by a bank employee, Herve Falciani, between late 2006 and early 2007.
The theft only came to light in December 2009 when it was revealed that Falciani passed data to the French tax authorities. Similar data on suspected tax evaders was subsequently handed over to other European countries.
The Swiss division of HSBC is not accused of any wrongdoing. “We do not condone tax evasion”, commented a spokesman for the bank.
The UK government revealed earlier in 2010 that it was acquiring the Swiss bank account details of up to 6,600 rich UK taxpayers suspected of evading tax.
HMRC has only just got to grips with a wealth of information from the 308 banks that were ordered in 2009 to provide information on suspected tax evaders prior to the launch of the New Disclosure Opportunity and the Liechtenstein Disclosure Facility (LDF).
The LDF, which started on September 1, 2009 and runs until March 31, 2015, offers favourable terms to those voluntarily disclosing undeclared accounts in Liechtenstein.
Investors can move accounts from other offshore jurisdictions into Liechtenstein to take advantage of the LDF – but not if they have received a COP9 letter from HMRC.
Anyone who has already received one has lost the right to voluntarily disclose under the LDF.
Director of Tax Investigations at law firm McGrigors, Phil Berwick, explained: “Taxpayers have widely assumed that they have until 2015 to make a disclosure under the LDF, but if the Revenue finds them first, that opportunity is lost… Those that did not register for the LDF will now be kicking themselves. I would urge taxpayers with undeclared tax liabilities using other foreign banks to come forward now before it is too late.”
Code of Practice 9
Information on COP9s taken from HMRC’s website informs targeted taxpayers that they have received a letter inviting the recipient to a meeting to discuss irregularities in their tax affairs. “This investigation is being conducted with a view to the imposition of a civil penalty for fraudulent conduct, if our suspicions are confirmed.” HMRC says that the investigation is not being conducted with a view to prosecution for tax fraud.
“The aim of the investigation is to uncover the full facts, determine the tax liabilities arising and collect these together with interest and, where appropriate, civil penalties for fraudulent conduct.”
Taxpayers have a choice as to whether or not to respond. If they attend a meeting they would be asked to prepare a report detailing the nature, extent and reason for the tax irregularities and provide supporting evidence. Payments on account will be expected while the investigation is ongoing.
If the taxpayer does not respond to the COP9 HMRC will scrutinise their tax affairs and take into account the taxpayer’s conduct during the course of the investigation in determining the level of any penalty due.
HMRC says that it may seek a mandate from the taxpayer to approach a third party such as a bank and will sometimes use its legal powers to do so. HMRC encourages the suspected tax evader to appoint a professional adviser as a representative during the investigation whom should also be supplied with the full facts of the suspect’s tax affairs.
COP9s have been in force since 2005 but so far have seldom been used. It is possible that with the UK government’s determination to crackdown on illegal tax irregularities that COP9 letters will be employed more frequently in the future.
A source close to HMRC described them as “one of the most serious letters you could possibly get”.
Switzerland is at the centre of global wealth management investment. It manages an estimated 3.78 trillion Pounds Sterling of wealth, and analysts estimate that potentially nearly a third of it is undeclared for tax purposes.
British expatriates living in Portugal may wish to seek advice on their UK tax residency situation and how to effectively and legitimately minimise their tax liabilities in the UK, if any, and here in Portugal. A consultation with an established international tax and wealth management specialist like Blevins Franks will give you confidence that your tax planning is effective and legitimate as well as appropriate to your specific circumstances.
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