Offshore: UK Treasury aims at offshore accounts

Recently, the UK Treasury wrote to all UK banks with offshore subsidiaries and demanded that they produce information relating to any UK resident who holds an account with an overseas subsidiary of a UK bank.

The banks' advice is that they must release this information if they hold data relating to the account on servers in Britain, and in at least one case, they released the information prior to informing the account holder. This meant that non-resident account holders with an accommodation address in the UK for statements have been included in the data sent to the HM Revenue and Customs.

By way of follow up to this, HMRC has announced a "disclosure" process for account holders under which voluntary reports may be made in relation to accounts.

There is a two stage process - and the closure of the first stage is imminent: notice of intention to disclose must be made no later than 22 June 2007. The disclosure itself must be made no later than 26th November together with any tax due.

HMRC say " The facility is open to those who hold or have held an offshore account, either directly or indirectly, that is in any way connected to a loss of UK tax and/or duty. For a limited period you can come forward and make a full disclosure of all undeclared liabilities, not just those connected with an offshore account. You can make a personal disclosure or one on behalf of an other. At the end of the notification period, HMRC will target those with offshore bank accounts and undeclared tax liabilities who have chosen not to come forward to make a disclosure."

Unlike similar schemes in South Africa and the US, the British government is not satisfied with the admission that an account exists and the payment of the tax: it is demanding that in every case where the tax unpaid or underpaid exceeds GBP2500 an additional 10% fixed penalty is paid. But the difference between the UK and other schemes is even more marked than that: the UK is also demanding interest on overdue sums.

HMRC offer the following summary of the scheme:

Your disclosure must be a full disclosure of all undeclared liabilities, not just those connected with offshore accounts, and contain:

• summaries of tax and/or duties, interest and penalties due.
• details of offshore bank accounts relevant to the disclosure and/or open at 5 April 2006.
• details of offshore assets that were held at 5 April 2006.
• an offer to pay
• a declaration that the disclosure is correct and complete.
• payment of the full amount disclosed, including interest and a 10 per cent penalty.

Interest runs from the date when the tax should have been paid until date of payment for all years involved. For VAT interest is payable for all years included in your disclosure. However for VAT due before 30/04/2005 use the rate applicable at 30/04/2005. For later VAT periods the interest runs from the date the VAT should have been paid until the date of payment.

In addition to the demands of UK banks, HMRC has also obtained information from European banks under the European Savings Directive, a measure which Brown strongly supported in the early days of his appointment as Chancellor, pushing particularly hard for it in the 1999 meeting of EU Finance Ministers in Tampere in Finland.

Failure to disclose, or to fully disclose, attracts a fine (levied by HMRC using the "civil penalty" procedure) of GBP5,000 and in appropriate cases prosecution may flow. This may be under tx legislation but also money laundering laws may be brought into play with the very severe penalties, including confiscation, applicable under the Proceeds of Crime Act 2002.

For more information see HMRC website