Offshore Tax Avoidance Amnesty Likely

British tax payers with undisclosed offshore funds likely to be found out soon but offered a taxation amnesty

In 2006 HMRC the British taxation authorities won a landmark victory over Barclays Bank Offshore which is based in Jersey but which has its parent company onshore in mainland Britain.  The banking institution has subsequently been forced to hand over customer records dating back up to ten years for British tax residents with offshore accounts.

This ruling set a precedent and has led to HMRC pursuing other offshore banks which have onshore parent companies registered in mainland Britain in a bid to root out tax avoidance and recoup substantial tax losses.  However, because so many people are thought to be affected, an offshore tax avoidance amnesty is apparently very likely with an announcement relating to the finer points of an amnesty due any day.

HMRC are trying to stop tax evasion by British tax residents who have offshore accounts but who have failed to disclose them and any interest earned from them to the Inland Revenue.  It is thought that up to one hundred and eighty billion pounds is lodged offshore by Brits meaning that there is likely substantial tax avoided by many of these account holders and HMRC wants to recoup what it has lost and prevent future tax avoidance continuing.

However, because there are so many people predicted to be affected by the clampdown by the Inland Revenue and because the banks will be handing over excessive amounts of data at a time when HMRC are streamlining and shedding staff, it is widely predicted in the financial industry that some form of amnesty will be offered to those minor offenders who have undeclared offshore accounts or who have held such accounts in the past.

Details of the amnesty have yet to be finalized but it is expected an announcement will be forthcoming as early as mid January 2007.  It’s likely those affected will be contacted by their offshore bank, advised that their details have been handed over to British tax authorities and also advised that if they have anything they should have declared that they can and should now do so and that they may ‘only’ be back taxed and fined at between 10 and 25 per cent of the maximum level. 

The maximum level for fines for illegal withholding of tax is currently up to 100 per cent of the unpaid amount on top of all the back tax plus interest.  For big offenders it’s thought HMRC will reserve the right to withdraw the amnesty and go after the full amount they are due…

All of this just goes to remind that while offshore banking and investing is totally legal, everyone has an absolute obligation to inform whichever taxation authority they come under the jurisdiction of that they have such accounts or investments…whether taxation is then due on interest earned or dividends received is up to the tax authority in question. 

If you are in any doubt about your current circumstances or liabilities we cannot recommend strongly enough your need to seek qualified independent taxation advice as soon as possible.