Tax authorities continue to crack down on tax due.jpg

Tax authorities continue to crack down on tax due


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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.

THE PORTUGUESE tax authority (Direcção Geral dos Impostos – DGCI) will launch another crackdown on taxpayers attempting to avoid paying tax.

From January 2009 it will have access to the bank accounts of taxpayers who show ‘external signs of wealth’.

Article 89-A of the General Tax Law will allow government investigators to look at banking records, without authorisation, in cases where it is suspected that declared income does not match an individual’s high standards of living.

This measure has been created to fight tax evasion and was included in the draft budget recently presented by the Portuguese government.

Previously, the tax authority could only access bank accounts with the permission of the taxpayer or, if refused, with a court order.

Inheritance tax investigation period extended

The UK tax authority HM Revenue & Customs (HMRC) has scrapped the 60 day limit during which it can investigate a person’s estate for tax due and is targeting taxpayers who have made gifts prior to death. Gifts made by taxpayers within seven years of death are liable for UK inheritance tax (IHT) and HMRC will focus on determining whether assets have been given away within seven years of their death and not declared.

In a significant move from the 60 day rule, HMRC can now take as long as it needs to investigate IHT returns against information it has been provided with during the lifetime of the deceased as well as information from other sources.

UK domiciles are advised to only dispose of their assets for inheritance tax purposes through legitimate tax planning schemes.

Meanwhile, beneficiaries who are left a home which is proving difficult to sell due to the current credit crises are facing ‘impossible’ demands according to accountants and surveyors. HMRC probate valuers are standing firm on IHT demands based on the valuation of property even if the families cannot sell to meet the bill.

It has been reported that probate valuers at HMRC are being ‘difficult’ to deal with and refuse to talk with grieving families about how to ease the situation, insisting that they will only negotiate with professional advisers.

Top UK female skier, Chemmy Alcott, was affected after her mother’s sudden death. Chemmy lived in the family home with her brothers and was presented with a 600,000 pounds IHT bill on her mother’s estate. The family were unable to put the property up for sale until probate was granted, which took 18 months. In the meantime, they have delved into their savings and paid over 50,000 pounds to HMRC with a further 1,500 pounds per month on the outstanding sum until the house is sold.

In the current slow housing market, this could take some time or they could be forced to sell at a price lower than the property’s value for estate purposes, which means that they could be paying too much tax. Others in a similar situation look to borrow the money from somewhere and in the current squeeze this could prove difficult and expensive.

On death, before probate is granted, the deceased’s assets are frozen which means that beneficiaries cannot access the deceased’s bank account or sell property. As the IHT has to be paid before probate is granted, the situation can put extra stress onto already grieving relatives.

It may be possible to apply to HMRC to pay in instalments over a period of 10years, with one-tenth of the tax paid before probate and the remaining instalments on the anniversary of death, with interest charged currently at four per cent per annum.

The probate valuation is based on the value of the property immediately prior to the death, although where the property is subsequently sold within four years of the death for a lower value, families may be able to make a claim for IHT ‘loss on sale’ relief.

Celebrities targeted for holding offshore accounts

A famous football manager, a male actor, a male TV presenter and a TV actress are among the UK’s household names being targeted by the tax authority, HMRC, in its crackdown on offshore tax havens. Bank accounts are being investigated in Bermuda, Panama, Andorra, Hong Kong, Liechtenstein, Singapore and the West Indies.

The four celebrities are among 80,000-100,000 wealthy people being tracked down by HMRC who hold offshore accounts and who HMRC suspects of non payment of tax. The tax probe is part of an ongoing crackdown on offshore accounts by HMRC. Last year, the tax authority called an ‘amnesty’ in the form of an Offshore Disclosure Facility for offshore account holders offering a 10 per cent cap on penalties to come forward and pay back tax due. It is thought that HMRC is planning a second amnesty to give those who did not make disclosures during the first amnesty the opportunity to wipe the slate clean.

France and Germany have pledged to get even tougher on offshore financial centres and are leading an initiative that could see the drawing up of a new black list of offshore jurisdictions still deemed to be ‘uncooperative’ by the Organisation of Economic Cooperation and Development (OECD). At present, there are three countries still black listed by the OECD: Liechtenstein, Monaco and Andorra. Germany is pushing for Switzerland to be added to the list because of its banking secrecy laws.

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