Offshore bank discovery

Offshore bank discovery

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My client has received a letter stating that under the provisions of Section 29 Taxes Management Act 1970 that they are reviewing his tax returns for years ended 05/04/02 to 05/04/05 because they hold information that he held offshore bank accounts.

They want copies of all the bank statements held. Do we have to supply them. We do not want to because there are some large deposits going in to the accounts which my client knows what they are for but cannot necessarily prove the source.

Have they got discovery to raise an assessment or by supplying the bank statements would we be giving them discovery.
NSH

Replies (5)

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By billgilcom
26th Aug 2008 10:58

Who has been talking then?
remember small can be beautiful too if oerfectly formed
Ok off to make my morning coffee with a belly laugh

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By User deleted
26th Aug 2008 10:27

Thank you for your responses.

It nice that the big boys (two top ten firms) read this site and are active members when the right subjects come up.

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By manoja
21st Aug 2008 14:27

Discovery?
You should note that s29TMA only gives HMRC the right to raise an assessment where an actual discovery of loss of tax has occurred. It does not permit HMRC to request particulars/documents as they have in your case. HMRC must demonstrate that an actual tax loss has arisen. Presently, the only fact they have determined is that your client has an interest in an offshore account. I would respond to the inspector on this basis pointing out that his/her request is invalid. In the interim, you should speak with your client and establish the circumstances leading to the existence of the account, the provenance of the funds therein and the source of the large credits you refer to. Was your client UK resident /UK domicile as this will have a bearing on the tax status. Furthermore, if the matter progresses to the point where HMRC raises assessments, it will be necessary for your client to produce evidence, before the General Commissioners, to displace the assessments, so it will be worth doing some review work.

Please email me on [email protected] if you want to chat.

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By billgilcom
22nd Aug 2008 13:37

Offshore work
If of course HMRC have a snapshot of an offshore bank account at any period and can see foreign interest or large unexplained deposits that have not been shown in tax returns then clearly they may well have discovery in relation to the interest (assuming that client was UK resident and domiciled when the interest arose). However as far as the large deposits were concerned there is nothing more than conjecture that there has been an understatement of income and therefore unpaid tax. The "discovery of foreing interest does no more than give them the right to raise and assessment/ make a direction for the year that they can see interest credited. If of course your client was non-uk domiciled and the interest had never been remitted (used or enjoyed) then of course there would be no income assessable and no discovery to be sustained.

You say that your client knows where the sums came from but cannot provide evidence of these. If of course they were understated income and accordingly there was underpaid tax then you would have a duty to recommend that he makes a full disclosure of all matters to HMRC as soon as possible to get matters resolved. You would also have to consider your position under the MLR report to SOCA.

Of course if the large amounts are not taxable then that is where you probably need to be thinking out of the box to get your client the right result.

You need to keep HMRC in their proper place with correct application of the enquiry procedures however you also do need to consider how you are going to take the enquiry and/or "disclosure" forward if there are any unpaid dutiesthat need to be disclosed. Clearly the correct channel is the one that is going to both minimise the legal amount that HMRC can recover and minimise the stress and anxiety that is inappropriately landed on your client.
regards and hope this helps
[email protected]
http://www.wamstaxltd.com

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By Johhny
22nd Aug 2008 13:11

Discovery
A couple of similar queries have recently been posted, which indicates just how widespread HMRC's bending of the discovery rules is becoming. A copy of my previous comments is below. I also wrote an Article in yesterday's Taxation magazine covering the offshore disclosure facility and discovery which may help.

As an investigations specialist I am seeing more and more letters along the lines of what you describe - "we are past the enquiry deadline but are now enquiring under the discovery provisions". Sometimes they even have a mocked up "notice of enquiry" attached. This is totally wrong; discovery is an assessing power, not an enquiry power.

I have made a formal complaint to HMRC on this, which led to an apology due to the inapprropriate use of discovery legislation. It also recognised that, on day one, HMRC may not have been able to issue discovery assessments in the first place.

I have, however, also seen cases where the opening letter was fully replied to, which ultimately led HMRC to boldly assert that they then had sufficient information to raise discovery assessments! The adviser was trying to be helpful but had simply given HMRC more (ulimately fruitless) subject matter to question, clearly dangerous from a PI point of view. Each case does of course depend on its own merits, but that does not remove the fact that HMRC inspectors are abusing the powers granted by Parliament.

Obviously I do not know the background to your case but I am happy to take a look at your letter (suitably anonymised of course) and to let you have some of the comments from HMRC's response to my complaint if suitable to use. My e-mail address is below.

[email protected]

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