By: BILL BLEVINS
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.
ABOUT 300 wealthy Britons who salted away one billion pounds sterling in the tax haven of Liechtenstein are being investigated by the UK tax authorities. Some of the more serious offenders could face up to seven years in prison.
HM Revenue & Customs (HMRC) is making inquiries into the offshore accounts of around 3,500 Britons which, in the more complex cases, could last up to three years. The tax authority has stated that it will consider criminal prosecution against those who have lied about their assets in earlier crackdowns.
The 300 names are thought to involve some of Britain’s wealthiest families, public figures and household names. HMRC is hoping to recoup around 300 million pounds sterling in unpaid taxes from the probe. Those found guilty of tax evasion will have to pay back the taxes owed plus interest and a penalty of up to 100 per cent of the unpaid tax.
The offshore account holders under suspicion of tax evasion were unearthed after HMRC reportedly paid 100,000 pounds sterling for information on a computer disc stolen from Liechtenstein’s LGT Bank (the country’s largest bank) last year by a former employee.
Information from the original stolen data yielded around 100 people who HMRC targeted for investigation in a bid to claw back a minimum of 100 million pounds sterling in unpaid taxes and up to 200 million pounds when interest and penalties were added. HMRC has since received more information from the informant.
It is not just wealthy investors who are at risk of criminal prosecutions. Accountants who have aided clients into secreting cash in Liechtenstein could also face in-depth investigation and possible jail sentences.
Former acting chairman of HMRC, Dave Hartnett – now replaced by former private equity boss, Mike Clasper – has warned that action will also be taken against accountants who hoard clients’ wealth in offshore tax havens.
In an interview with Accountancy Age, Hartnett said that HMRC was determined to crack down on a minority of repeat offenders who advise clients to illegally use tax havens. A detailed picture of rogue accountants was being built up who had helped wealthy investors to hide money in Europe and the Channel Islands. Tax investigators were using sophisticated computer software to collect evidence.
“We are constantly building up intelligence on firms that help their clients into any sort of [illegal] offshore arrangement. Every individual we investigate in relation to Liechtenstein we will ask how [their money] found its way to Liechtenstein and we may pursue that enquiry quite vigorously until we understand it. If we find a dishonest accountant, we will automatically prosecute and the tax world knows this,” Harnett said.
He added: “Because we are identifying more people with offshore accounts, we are better informed today than we have ever been before about how they have found their way into the offshore environment.”
Tax advisers were in favour of HMRC’s actions. Chairman of Management of Taxes Committee at the Chartered Institute of Taxation, John Whiting, said accountants welcomed the tax authority’s distinction between illegal tax evasion and legal tax planning and avoidance.
HMRC is also poised to launch its next attack in its war against offshore tax evasion. Following its success last year of forcing UK banks to hand over details of its offshore account holders, HMRC is planning to target about 25 foreign banks in a similar way. The tax authority is seeking legal notices to present to the banks enforcing them to disclose information on UK clients holding offshore accounts.
Meanwhile, HMRC is still currently investigating, and is expected to interview, 60,000 suspected tax evaders. These are people whose bank details revealed a suspicion of tax evasion and who failed to come forward under last year’s Offshore Disclosure Facility, often called a ‘tax amnesty’. This includes 20,000 people who registered with the facility but then did not supply their details.
An HMRC spokesman warned that those who had not come forward needed to do so quickly, before tax investigators “start knocking on doors, metaphorically speaking.”
At the same time as HMRC bought the computer data of potential tax dodgers from the LGT whistle blower, a number of other countries received similar information, including Spain, France, Italy the US and notably Germany. The later paid around 4.5 million euros for a list of between 750-1000 names of tax offenders. German tax investigators launched an immediate search to hunt down the defaulters which involved raids on homes, offices and banks.
There may yet be even more tax evaders for Germany’s taxmen to track down in the light of a court case involving a man handling bank data from Liechtenstein. The data is said to contain information on 1,850 account holders at Liechtensteinische Landesbank (LLB), Liechtenstein’s second largest bank.
Germany, along with France, wants members of the OECD to meet in October to discuss tax havens and tax evasion.
HMRC acting chairman Dave Hartnett has summarised why countries are so keen to track down tax dodgers:
“Tax evasion is not a victimless crime. Honest citizens have to meet the cost of the tax that is evaded by a minority who are dishonest. Tax cheats deprive our public services of vital funding. Everyone is entitled to conduct their financial affairs in privacy but secrecy laws which facilitate tax evasion are completely unacceptable. Those who have hidden their income and gains from HMRC should come forward and make a prompt and complete disclosure.”
Blevins Franks will be discussing legitimate tax planning arrangements for Portugal and the UK at their September seminars.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranksinternational.com