By: BILL BLEVINS
Financial Correspondent, Blevins Franks
BRITAIN’S SO-CALLED tax ‘amnesty’ flushed out around 60,000 registrations by offshore account tax dodgers, who decided to own up and face a reduced penalty of 10 per cent rather than risk suffering the full 100 per cent penalty of tax due.
There was a last minute rush as more than 45,000 people filed their intention to make a disclosure by the deadline of June 22. The 11th hour surge followed a letter sent by HM Revenue and Customs (HMRC) reminding possible tax evaders of the deadline a week before the actual date.
The response to the ‘amnesty’, officially named the Offshore Disclosure Facility (ODF) and not actually a true amnesty, was slow to start. The ODF was announced in April and three weeks before the deadline only 4,300 had signed up. HMRC’s Director General, Dave Hartnett, hadn’t seemed perturbed, saying that after having studied amnesties in other countries, there tended to be many disclosures in the last week.
Tax cheats
The letters were sent to 200,000 likely tax cheats taken from the list of 400,000 names supplied by high street banks earlier this year, warning the recipients that the penalties will be much higher than under the disclosure arrangements.
Out of the 400,000 names, Hartnett said that he estimated that about 100,000 of the banks’ customers owed tax. Now that the deadline has passed, tax investigators will scour through those people who did not respond and aggressively crackdown on those where tax evasion is suspected. Hartnett has said that his investigation team was “raring to go” and that their enquiries would be “intrusive and thorough”.
The ODF required people with undeclared interest and unpaid tax in offshore centres to register their intention to make a disclosure by June 22. They have until November 26 to make a full disclosure of undeclared tax dating back to 2001 and pay all the tax, interest at 7.5 per cent and 10 per cent penalty due. For tax amounts of less than 2,500 pounds sterling, there will be no penalty.
The full disclosure must include all undeclared liabilities, even any which have nothing to do with offshore accounts. Summaries of tax, interest and penalties are needed, offshore bank account details and details of offshore assets held as at April 5 2006, an offer to pay, a declaration that the disclosure is correct and complete, and payment of the full amount including interest and penalty.
Those who have already registered include retirees squirreling away sums, City bankers, wealthy businessmen, and a seaside landlady hiding her takings from the taxman. Hartnett said that a lot of intentions to disclose were in the millions and cover the whole range of taxpayers.
In an article on www.accountingweb.co.uk, Will Heard, head of tax investigations at a chartered tax advisory firm, wrote: “The rules are such that anyone who has salted away large amounts of cash offshore from business activity over many years will not be able to make an adequate disclosure by the November 26 deadline let alone find the money (in many cases) within such a short period of time to make the full payment of tax, interest and penalty. Consequently there will be many incomplete disclosures and fraudulent disclosures which may go through on the nod but many will be caught out by HMRC who have until April 30 to make a ‘final decision’ on the disclosure”.
Heard said that there have been many “inconsequential” disclosures which often fell below the minimum £2,500 allowable limit. Some people were not aware that their money was offshore until contacted by their bank.
Heard continued: “Letters have gone to all and sundry, including many people, in whom HMRC have little interest, but overseas governments may have a more active interest. I am thinking, for example, of UK domicile individuals who live in France but who retain or have had a UK address and whose ‘tax point’ is now France rather than the UK. Will HMRC give privileged bank information which is of no real use to them to the French tax authorities under the mutual assistance directive, and what will they get in return?”
Investigations teams
The ODF is expected to net the Treasury between 750 million pounds sterling and one billion pounds sterling in unpaid tax. People who, in HMRC’s opinion, owe in excess of 500,000 pounds sterling of unpaid tax will be dealt with by the Special Civil Investigations team.
Those who HMRC believe owe between 75,000 pounds sterling and 500,000 pounds sterling in undisclosed tax will come under the scrutiny of one of HMRC’s Civil Investigation of Fraud teams, set up specifically to deal with the ODF. Those who HMRC believes have undisclosed tax of less than 75,000 pounds sterling will be dealt with by their local tax offices, which will raise enquiries into their previous tax returns.
It was reported that high profile tax evaders, such as celebrities, are expected to be first in HMRC’s sights as it attempts to make a public example of those hiding money offshore. Hartnett denied that sports personalities and national figures would be targeted for this purpose.
Earlier, Hartnett told the Sunday Times that he was concerned about the way in which offshore schemes had been sold by high street banks. “One of the things I am concerned about is the extent to which some of the marketing has … misled them”, he said.
“We will look at how offshore products have been marketed because part of our job is to try to make sure people understand their tax obligations and meet them, so if they are being misled we want to understand that”, Hartnett said.
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