More Offshore Bank Accounts Targeted by HMRC

Offshore accounts held by Britons in HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB are being examined by HMRC

When HM Revenue and Customs won their case against Barclays Bank PLC last April and forced the offshore arm of the banking institution to hand over full account details of UK domiciled individuals with offshore bank accounts, a shudder went through the entire banking industry.

Everyone was aware that it was only a matter of time before HMRC went after other banks whose headquarters are on the British mainland but who have large offshore subsidiaries known to be home to offshore bank accounts held by British resident and domiciled individuals.  Well, the time has now come and more offshore bank accounts are being targeted by HMRC with the Financial Times claiming that HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB are the latest targets of HM Revenue and Customs.

In the initial ruling against Barclays Bank it was estimated that up to one and a half billion pounds worth of unpaid tax would be reclaimed from offshore bank account holders who had illegally failed to disclose interest earned on accounts held. 

The latest ruling against four more industry giants - believed to be HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB as previously mentioned - is only expected to reap around two hundred and seventy five million pounds in unpaid tax revenue.  This suggests one of three things – either Barclays Bank offshore is home to more tax evaders’ accounts than any other bank, or the ruling against Barclays returned nowhere near the figure expected or that the ruling resulted in those with offshore bank account structures who were likely to be affected in later rulings took measures to protect themselves and their account and privacy status in the interim.

While opening and depositing funds in an offshore bank account was made fully legal back in the late 1970s when exchange controls were eased, failing to declare interest earned on deposits is actually illegal.  If someone attempts to avoid taxation in this way and is caught then they will usually be forced to repay in full the taxation missed plus face an additional fine on top of up to 100% of the tax missed.

Earlier this year it was widely predicted that the numbers of Britons with undeclared assets offshore was so high and basically too much to handle for HMRC that some form of offshore tax avoidance amnesty would be granted allowing all those with unpaid tax debts to come forward, prove how much they owe and avoid much of the resultant fines.  It was expected to be announced sometime this month that those in this situation could declare their tax due going back twenty years, pay the tax and face a flat fine of around 10% of the tax amount missed on top. 

It has since become clear that HMRC are not yet ready to offer this amnesty and want to wait until they examine the data from the four new offshore banks affected.  The amnesty could take until the spring or early summer to come into effect.  If it is announced those affected will have a period of about six weeks to declare the fact that they have offshore accounts and then they will be allowed about four months to calculate how much they owe.  While industry advisers say this is not enough time for affected individuals to seek advice, HMRC and the Special Commissioners are likely to be of the opinion that those who are in this position have only themselves to blame.