Offshore Banking and HMRC

The progress made by HM Revenue and Customs to obtain taxation lost through illegal reporting of offshore banking activity

The partial taxation amnesty offered by HM Revenue and Customs (HMRC) last year to UK residents with undeclared offshore bank deposits and financial assets has proved relatively successful in terms of the taxation and fines raised.  However, the amount paid into the Revenue’s coffers to date is actually far short of HMRC’s initial predictions.

According to the Sovereign Group, partly as a result of the fact that the amount of revenue received by HMRC is well below that expected, the British tax authorities are currently contemplating extending the partial reprieve to include customers of over 170 additional banking institutions - although they are likely to face opposition from the banks in question.  There is a fine line between the banks’ requirement to supply information about account holders suspected of illegally avoiding taxation due and their legal duty to maintain their customers’ personal privacy.  When it comes to offshore banking and HMRC however, the Revenue is not in the business of letting outstanding taxation slip through its fingers.

The British Bankers’ Association, the Building Societies Association and the Association of Foreign Banks have issued a joint statement in anticipation of a decision by HMRC to pursue the other 170 banking institutions.  The bodies highlight the fact that whilst they do not wish to shield any customer from the force of the Revenue where illegal reporting has taken place, they do not wish to undermine their reputations and standing by making free with confidential client data.

To date the action taken by HM Revenue and Customs against five British high street banks and their customers has netted around GBP 400 million in lost taxes and associated fines.  An estimated 45,000 UK based account holders came forward by the November deadline and an additional GBP 100 million is also believed to be in the pipeline, being paid by those with more complex offshore affairs who specifically requested additional time to make their tax and fine payments. 

This additional 100 million pounds will take the total raised thanks to the partial amnesty to GBP 500 million – but this is far short of the predictions made by HMRC last year.  They predicted that illegal reporting of offshore banking activity could net in the region of GBP 1.75 billion.  Whether they will be granted leave to take action against the remaining 170 institutions they have highlighted as potentially shielding clients with undeclared offshore assets remains to be seen…if they are then they could reach their financial target.

At ShelterOffshore we do not condone the use of offshore accounts and structures for the avoidance of taxation but neither do we support the loss of client confidentiality.  If you are unsure of your reporting requirements or if you are unsure of whether you have to make a declaration about the assets you have offshore, take professional advice immediately.