UK Revenue continues mission against offshore tax evasion

By BILL BLEVINS [email protected]

Bill Blevins is the 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

If British offshore savers were already feeling persecuted, they may need to brace themselves.  

HM Revenue & Customs (HMRC) is considering increasing the penalties for tax evasion through offshore accounts.  Experts have also warned that other offshore centres may copy the deal with Liechtenstein, where more favourable penalties are offered to those who voluntarily disclose their accounts… but where the offshore account will be closed if the owner does not disclose it to the UK authorities.

HMRC’s New Disclosure Opportunity (NDO), which is for offshore accounts other than those held in Liechtenstein, began on September 1.  Anyone needing to take this opportunity must notify the tax office by the end of November and make their full disclosure and payment by January 31 next year (for paper disclosures) or March 12 (for online submissions).

Under the disclosure penalties will be 10 per cent or 20 per cent, the latter for those who were contacted during the 2007 Offshore Disclosure Facility.  The full amount of tax owed plus interest also must be paid.

While HMRC has said it will not fine those who made innocent errors and were misled by their financial adviser, taxpayers cannot use innocence of the laws as an excuse – they will still be charged the 10 per cent or 20 per cent penalty.

The tax office is under pressure to help the government plug the growing gap in the public finances.

HMRC launched a podcast on its website where Dave Hartnett, the Permanent Secretary for Tax, warns that individuals who fail to disclose an undeclared offshore income face an increased risk of prosecution.

Hartnett emphasises that penalties will be much higher for those who do not come forward under the NDO (minimum 30 per cent, maximum 100 per cent of the unpaid tax), and that “there will not be another chance” to benefit from lower penalties.

“This time,” he warns, “we are going to have information from the majority of banks operating in the United Kingdom”.  

Prior to the 2007 facility, HMRC had received information from Barclays, Lloyds TSB, HSBC, HBOS and Royal Bank of Scotland on their offshore clients.

This time it has obtained information from 308 banks. The banks have been asked to provide the following information on their offshore accountholders: (1) Name.  (2) Address.  (3) Date of birth.  (4) Date the account was opened or closed.  (5) Account balance.  (6) Any transaction information.

Tax investigators will trawl through the information received and those found to have lied about disclosure are more likely to face prosecution.  HMRC may also probe their onshore accounts. HMRC will also scrutinise rental income on overseas properties.

According to The Sunday Times, the Revenue has also begun an investigation into leading building societies and former mutuals.  

The article also reports that the Revenue is considering applying for increased powers, whereby it can take half an individual’s offshore wealth if they are proved to be using an offshore jurisdiction to evade tax (currently penalties cannot be higher than 100 per cent of the unpaid tax).  Hartnett told the newspaper that, when prosecuting someone for tax evasion, “it would help to change the rules so that those with hidden offshore accounts face much larger penalties”.

Running alongside the NDO, HMRC is offering a separate disclosure opportunity to those with capital hidden in Liechtenstein.  This offer came after it struck a deal with the alpine jurisdiction to exchange information.  The deal was ground breaking – Liechtenstein agreed to close down accounts belonging to UK resident accountholders who do not take up the offer and report their account in the UK.

There has been criticism about the disparity between the NDO and the Liechtenstein disclosure opportunity since the latter offers more favourable terms.  The NDO closes next March; the unpaid tax to be declared and paid goes back 20 years and the penalty could be 20 per cent.  The Liechtenstein facility does not close until March 2015; the unpaid tax only goes back 10 years and penalties are capped at 10 per cent.

This could result in individuals with accounts in other jurisdictions like the Channel Islands and Isle of Man moving their funds into Liechtenstein before making their disclosure.

Experts have warned that the UK-Liechtenstein agreement may have repercussions for offshore centres around the world.  Since they cannot afford to have large capital outflows from their banks, they may negotiate similar tax information exchange deals with the UK to encourage their wealthy clients to leave their funds where they are.  

Considering that Portugal’s state deficit hit 7.3 billion euros in the first half of the year, and is struggling with falling tax revenues, it  is likely to take a leaf out of the UK’s book and step up their crackdown on offshore tax evasion.  France has recently managed to obtain 3,000 names of individuals suspected of tax evasion though Swiss bank accounts.  

The irony is that with the withholding taxes applied on offshore bank accounts under the EU Savings Tax Directive, it is now often possible to pay less tax using fully legitimate tax planning arrangements.  An experienced financial and tax adviser like Blevins Franks will advise on the opportunities available to lower your tax bill, as well as reduce inheritance taxes for your heirs if necessary.    

Blevins branches out

Blevins Franks Financial Management Limited has been selected by the Telegraph Media Group to provide specialist services for the newly launched Telegraph Expatriate Wealth Service.

This service provides tax, wealth management and pension services to expatriates and UK residents planning to move overseas or who own assets or property outside of the UK.

Core services offered tax and retirement planning, pensions, QROPS investment management and asset protection. They also offer trustee and offshore company services, among others.

Telegraph Media Group and Blevins Franks have also released two reader guides, The Daily Telegraph Guide to New Pension Opportunities for Expatriates, with a focus on QROPS, and The Sunday Telegraph Guide to Unexpected Tax Havens, which promotes the tax planning opportunities to be found in the key southern European countries as well as other jurisdictions.

The guides can be downloaded from or a hard copy requested through the Telegraph newspaper and website.

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