HMRC know that many people conceal untaxed income and gains offshore

Many people think that they can easily conceal untaxed income and gains from HMRC by putting their assets in other countries.  In recent years HMRC has made a concerted effort to put a stop to this.  Through agreements with other countries HMRC are getting much more information about assets held abroad by UK residents, including bank and investment accounts, properties and business interests.

Under the Common Reporting Standard (CRS), financial institutions and financial service companies have to provide information to HMRC in respect of accounts operated by UK citizens and UK tax residents.

HMRC have also increased the penalties that can be applied to cases where offshore accounts have been used to evade tax to between 100% – 200% of the tax due.  In addition, HMRC can charge an asset based penalty of 10% of the value of assets connected to the failure.

Offshore Bank Accounts

In particular, HMRC are getting information about bank accounts linked to addresses in the UK from three main sources:

  • Exchanges of information with tax authorities in other countries under the CRS;
  • “Information notices” issued to banks that operate in the UK forcing them to recover data about bank accounts held in other countries which are nevertheless linked to UK addresses; and
  • Purchased data stolen from offshore banks providing information on accounts linked to UK addresses.

What are HMRC’s concerns?

When HMRC become aware of an offshore bank account they have two main concerns:

  • What was the source of the funds deposited in the bank account, and, if appropriate, has it been declared in the UK for tax purposes?
  • Has any UK taxable income or gains arisen in the bank account (for example, interest or dividends)?

In order to establish the correct position, HMRC will usually start a tax investigation into the tax affairs of the person operating the account.  If they suspect that it is a case of serious tax fraud then HMRC will either opt to obtain evidence for a criminal prosecution, or they will open the case using the procedures set out in Code of Practice 9.  If they suspect that it is a serious case involving tax avoidance then they will use the procedures set out in Code of Practice 8.  However, if the case does not appear to fall into a “serious” category or the information held by HMRC is not conclusive then they will open an ordinary tax investigation into the affairs of the person operating the account.

HMRC are aware that some offshore accounts are held in names of offshore companies.  HMRC are currently obtaining data from offshore jurisdictions in respect of these accounts where the beneficial owner of the company is UK resident.

How can WLH Tax Help

WLH Tax will discuss your personal circumstances with you to establish your tax residence and domicile status.  We will also establish whether HMRC are entitled to the information they have requested.  If we believe that HMRC are not entitled to the information they have requested then we will tell them this, and ensure that you only provide HMRC with the documentation they are legally entitled to receive.  Alternatively, you can provide the information to them on a voluntary basis, but HMRC should be made aware of the extra co-operation you are providing by giving them the documents.

However, if you have used an offshore bank account to conceal untaxed income or gains that should have been subject to UK taxation, we can manage the tax investigation or voluntary disclosure to HMRC on your behalf.

If you currently or previously operated an offshore bank or investment account and are subject to a tax investigation or you wish to make a voluntary disclosure to HMRC, please contact us for a free, confidential and no obligations discussion.  We are happy to have an initial free of charge meeting with prospective clients.

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