Tax Investigation Specialists

WLHTax - Services

Offshore Tax Investigation

HMRC know that many people conceal untaxed income and gains offshore

Many people think that they can easily conceal untaxed income and gains from HMRC by putting their assets in other countries. In recent years HMRC has made a concerted effort to put a stop to this. Through agreements with other countries HMRC are getting much more information about assets held abroad by UK residents, including bank and investment accounts, properties and business interests.

This is an area where HMRC are expanding their interests. They have published a document entitled “No safe havens: Our offshore evasion strategy 2013 and beyond” setting out how they intend to deal with potential offshore evasion by UK taxpayers.

HMRC have also increased the maximum penalties that can be applied to cases where offshore accounts have been used to evade tax from 100% of the tax due to 200%. Please note that the increased penalty does not apply to funds concealed in all jurisdictions.

Offshore Bank Accounts

In particular, HMRC are getting information about bank accounts linked to addresses in the UK from three main sources:

  • Exchanges of information with tax authorities in other countries ;
  • “Information notices” issued to banks that operate in the UK forcing them to recover data about bank accounts held in other countries which are nevertheless linked to UK addresses; and
  • Purchased data stolen from offshore banks providing information on accounts linked to UK addresses.

What are HMRC’s concerns?

When HMRC become aware of an offshore bank account they have two main concerns:

  • What was the source of the funds deposited in the bank account, and, if appropriate, has it been declared in the UK for tax purposes?
  • Has any UK taxable income or gains arisen in the bank account (for example, interest)?

In order to establish the correct position, HMRC will usually start a tax investigation into the tax affairs of the person operating the account. If they suspect that it is a case of serious tax fraud then HMRC will either opt to obtain evidence for a criminal prosecution, or they will open the case using the procedures set out in Code of Practice 9. If they suspect that it is a serious case involving tax avoidance then they will use the procedures set out in Code of Practice 8. However if the case does not appear to fall into a “serious” category or the information held by HMRC is not conclusive then they will open an ordinary tax investigation into the affairs of the person operating the account.

HMRC are aware that some offshore accounts are held in names of offshore companies. HMRC are currently obtaining data from offshore jurisdictions in respect of these accounts where the beneficial owner of the company is UK resident.

How can WLH Tax Help?

Cases involving other tax jurisdictions often pose particular problems for tax advisers. It is not unusual for HMRC to request information from you in circumstances where you are not required to give it to them – though they will not tell you this. For example, if you are not domiciled in the UK (even though you are resident in the UK for tax purposes – “resident” and “domiciled” are different concepts for tax purposes) it is entirely justifiable to operate offshore bank accounts and there will not necessarily be any tax liability in the UK.

WLH Tax will discuss your personal circumstances with you to establish whether HMRC are entitled to the information they have requested. If we believe that HMRC are not entitled to the information they have requested then we will tell them this, and ensure that you only provide HMRC with the documentation they are legally entitled to receive. Alternatively you can provide the information to them on a voluntary basis, but HMRC should be made aware of the extra co-operation you are providing by giving them the documents.

However, if you have used an offshore bank account to conceal untaxed income or gains that should have been subject to UK taxation, we can manage the tax investigation or voluntary disclosure to HMRC on your behalf.

Call us now

If you currently or previously operated an offshore bank or investment account and are subject to a tax investigation or you wish to make a voluntary disclosure to HMRC, please contact us on 020 7491 9690 or 020 7491 9696 for a free, confidential and no obligations discussion. We are happy to have an initial free of charge meeting with prospective clients.