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Saturday, 18 December 2010

Threat to offshore accounts as taxman does deal with Liechtenstein

Threat to offshore accounts as taxman does deal with Liechtenstein

Perfect KnowledgeSome of the richest people in the UK will find out today if the taxman will be allowed access to details of their secret offshore accounts. The tax courts will rule on whether HM Revenue and Customs can demand information from accounts held by an estimated 500,000 Britons at 300 foreign banks with branches in the UK. This comes a day after the Revenue struck an historic deal with Liechtenstein to flush an additional tens of millions of pounds in unpaid taxes from about 5,000 Britons who have accounts in the secretive tax haven. 

The Treasury is desperate to track down tax avoiders as it seeks to boost its coffers. The economic downturn has taken a drastic toll on the public finances as the income from personal and company taxes has fallen. Tax receipts dropped by £32 billion last year, the steepest fall since the 1920s.

John Cassidy, head of tax investigations at PKF, the accountant, said: “This seems like a move from a Government which is both strapped for cash and has a long-held desire to crack down on secretive tax havens.” HMRC said that British savers with accounts in Liechtenstein who came forward voluntarily could avoid hefty penalties. If they do they will be liable for all unpaid tax since 1999 and an additional penalty charge of 10 per cent. Alternatively they can pay a flat tax of 40 per cent. They must come forward before 2015.

Failure to do so will render them liable for penalties of between 30 and 100 per cent and possible prosecution. HMRC said yesterday that it had not calculated how much the scheme could yield but some estimated it could be close to £100 million. Those with offshore accounts in the 300 banks discussed in today’s court case have been offered a similar but less generous amnesty. They will be expected to repay all unpaid tax for the past 20 years plus a penalty before March next year. A similar amnesty scheme for Britons with offshore accounts at the five leading high street banks generated £400 million in 2007. Accountants said the preferential deal for savers in Liechtenstein was unfair but HMRC called it a pragmatic arrangement.

Private Bank off shore“To encourage as many people as possible to put things right HMRC has agreed to a pragmatic arrangement which recognises the complexity of the affairs of investors in Liechtenstein. This is a cost-effective way for both HMRC and UK investors to put their tax affairs on the right footing,” an HMRC spokesman said. The Revenue said it believed that Britons could hold between £2 billion and £3 billion in Liechtenstein-based accounts. HMRC has already won permission from the Special Commissioners, the tax court, to force 11 banks to hand over information on those holding offshore accounts since 2007.

However there is no such full disclosure with the banks in Liechtenstein. Instead, the notoriously secretive banks in the principality will hand over information only when HMRC has already identified a potential tax evader. But the banks have agreed to close the accounts of any Britons who have not come forward to HMRC, leaving savers vulnerable to being tracked down by moneylaundering rules as they try to move their money into another account or out of the country. Accountants said that the tax “amnesty” could be extended to other tax havens that HMRC had recently struck information-sharing deals with, such as Guernsey and Jersey.

Source: Times

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