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Barclays blow the gaff - Others to follow but will it be too late for the amnesty? By Will Heard

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6th May 2007
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Will Heard publishes Barclays disclosure letter and suggests that the other High Street banks will soon have to tell their customers that they have informed on them to HMRC or face the consequences.

Barclays has written to thousands of customers living in the UK telling them that the bank provided the names and addresses of any of its customers holding offshore accounts with Barclays in Jersey, Guernsey, Isle of Man, Gibraltar, Cyprus and the Republic of Ireland.

The letter is reproduced here.

Moreover it has given HMRC details of the opening and closing balances and the list of transactions within certain defined periods namely February and July 2000, February 2001, March 2002, December 2003 and August 2004.

This unprecedented move has come about because HMRC have operated tax law, apparently for the first time in these particular circumstances, that has been in existence since July 29, 1988. One wonders what kept them waiting.

Needless to say this letter has been unwelcome news for many thousands of Barclay’s customers since the interest on these accounts has not been declared for taxation not to mention the money that was put in there in the first place.

Readers are already aware that HMRC have issued a new set of guidelines enabling UK residents to make quick disclosures of back tax liabilities which are likely to be superficial in many cases that ignore the underlying cause of the tax evasion i.e. undeclared business earnings.

The timetable imposes a deadline for these disclosures of November 26, 2007. By this time the disclosure must have been made and all tax, interest and penalties must have been paid.

Some people will be able to comply and disclose quickly and cleanly but any people will not be able to comply with these conditions. Their tax affairs will be far too complicated. If they did not hit the deck running on the day that these guidelines were announced then they have already failed.

This does not augur well for those many thousands of people with the other High Street banks all of whom have been subject to the same disclosure treatment as Barclays albeit that the Special Commissioners’ decisions in favour of HMRC were only made recently in these cases.

What are these people going to do if the other banks do not get off their derrieres quickly and sing from the same hymn sheet as Barclays? They are going to get very annoyed. Why? Because many of them will not have heard of the HMRC disclosure guidance, or, if they have done so they will only have hazy knowledge of it and many will, as my colleague Paul Malin often says, “assume the ostrich position”.

Consequently if they do not get a letter from their own banks to jog their memories soon, it will be far too late to organise a full and complete disclosure of past compliance issues in any but the most simple of cases.

Some might comment that this does not matter because surely everyone now knows about the disclosure guidance so the banks are covered. I do not believe that.

Yesterday (May 2) I was at a conference attended by about 100 accountants in practice. I mentioned the new HMRC disclosure guidance parameters to three of them. Only one had heard of the HMRC announcement. My colleague also spoke to several accountants at the same conference one of whom knew about the disclosure conditions but did not realise that it also covered people without offshore bank accounts because they will be treated under the same rules if they get a disclosure in under the same terms as people with offshore accounts.

What is the upshot of all this? Speaking as someone who did not think that HMRC would rush out the disclosure guidelines but thought that it would be this time next year before they were issued – if at all – may be my crystal ball is a little tarnished but I think that the banks will take a number of weeks yet before they follow Barclays lead but I also think that HMRC will be forced to extend the deadline for getting the whole matter done and dusted. Whether this will be done “unofficially” in given cases or will be a published guideline remains to be seen. Only time will tell.

Will Heard is a specialist in tax investigations work for Shaws of Edgbaston www.shawtax.co.uk He may be contacted on 0121 452 1515 or [email protected]

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Replies (27)

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By listerramjet
11th May 2007 13:14

whilst I can
understand the sentiment, don't really understand the invective. There is nothing morally wrong in assisting someone on a professional basis in sorting out a mess - or are you suggesting that professional representation should be denied to anyone accused of wrongdoing?

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By User deleted
11th May 2007 11:46

Andrew and Dennis dismay
You have to understand that many accountants in practice spend the lion's share of their time in networking, marketing and selling eg Sage products, insurance policies, pension plans on commission.

Doesn't leave much time for keeping up to date with developments or providing client service, but it does make a pretty upward curve on the practice income chart.

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By User deleted
11th May 2007 13:29

Can't file foreign income/interest via SA online
On a side note, has anyone notice that it is not possible to file foreign interest income via SA online. A paper copy must be obtained. To a ordinary punter who just file his SA online, he would not have encounter questions about his/her foreign income.

Perhaps SA online should now includes foreign income pages, with development cost funded by the winfall from this offshore raid.

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By ACDWebb
09th May 2007 14:05

HSBC did
during April

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By carnmores
09th May 2007 13:52

leaving aside Richard's hobby horse
i can see justification for disclosure of the offshore acs but not for other nation states such as Eire & Cyprus - that appears absolutely wrong and should be appealed

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By specialtax
08th May 2007 17:00

Other banks are starting to follow suit
Thanks David - I think it may be a case that the amnesty is something of a "sleeper" -

I have just returned from visiting a new client who received a letter from the RBS last week - fairly similar to the Barclays letter but it did not mention any dates for which they will provide information to HMRC in the letter itself.

Perhaps the momentum is still gathering and will proceed apace in the few weeks before the deadline for registering that a disclosure is to be made.


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By User deleted
08th May 2007 17:15

Bank of Scotland
As a tax adviser I did of course already know about all of this, but even so I got a letter of explanation on this from BoS about my own Jersey bank account about 2 or maybe even 3 weeks ago together with a schedule of interest earned in the relevant years?

Needless to say as I had declared the interest in the relevant tax returns and paid the tax, I ignored the letter. :)

I'm sure many here will call me smug, but I have no sympathy for anyone who knowingly did not not return income and pay tax and who is now running around looking for paperwork to work out how much to declare to meet the HMRC deadline, or for anyone who knowingly evaded their responsibilities and who has yet to be informed (or find out) about the deadline..........

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Richard Murphy
By Richard Murphy
09th May 2007 17:22

To Mike Whittaker
Mike

That has nothing whatsoever to do with this issue. The interest is taxable. The charges may be deductible for a business. They're not for an individual. In which case whether they are greater or not is irrelevant. The interest requires declaration come what may and tax must be paid if due.

Richard Murphy

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By billgilcom
09th May 2007 17:48

Enlightenment for David
Maybe there was another reason some of the audience couldn't look you straight in the eye ...... maybe they had received a Barclays/RBoS etc letter and were wondering if they could go for a 10% penalty too

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David Winch
By David Winch
08th May 2007 16:47

Disengagement

Will

Recently when I have been speaking to gatherings of accountants on money laundering (as I am wont to do) I have been mentioning the tax 'amnesty' and the related money laundering reporting issues - along the lines outlined in my posting of 17 April Some FAQs to help AccountingWEB readers here.

As you will know one does get a 'feel' of an audience, a kind of sixth sense. The 'feel' that I get when I mention the tax 'amnesty' is one of immediate disengagement by the audience. Suddenly no one is catching my eye as I look around.

Whether this is because they don't know about the 'amnesty', or don't think it important, or are embarrassed that they have not done anything about it, or feel that they do not have any dishonest clients, or are pretending to themselves that they do not have any dishonest clients - I don't know.

Can anyone enlighten me?

David
www.MLROsupport.co.uk

P.S. I think there were 70 to 80 firms at the conference which you mention and which you and I both attended on 2 May. As it happens that conference was particularly directed towards firms giving tax advice, hence the excellent presentation by Rebecca Benneyworth. I was merely a spectator, but one might expect that that audience would, more than most, have been aware of the 'amnesty'. What chance of general practitioners (and others who are not attending such conferences) being 'clued up'?

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By User deleted
09th May 2007 22:23

JUST A FEW WORDS.
Richard Murphy

”Will Heard really does pluck at the old heart strings rather well. Alas, I have to say it's to no effect. Not a single reasonable person will feel sympathy with the victims in this parable of woe.”

Will Heard

This is typical of Richard Murphy’s approach when posting comments on other people’s articles i.e. to set up a specious argument and then knock it down. This is such an easy thing to do but a waste of time and words.

At no point in this or an earlier article have I asked for sympathy for any tax evader but I have certainly asked for understanding of the human predicament when people are presented with a simple set of rules for these disclosures that ignore the complexity of the tax system and the complexity of people’s lives. These temporary disclosure rules are effectively self assessment for tax evaders. A contradiction in terms so therefore irreconcilable. We will be living with the consequences for years.

Richard Murphy

“Second, the practitioners who don't know about this simply don't deserve to be in practice.”

Will Heard

Whether practitioners who are still not fully aware of the disclosure conditions do not deserve to be in practice is neither here nor there, Mr. Murphy. I have news for you – they ARE in practice so is it not more constructive to deal with the reality than the fantasy?

Richard Murphy

“Third, those practitioners who do know and who have stuck their heads in the sand are negligent. I told people what I'd be doing for my clients within days of this being announced. I even posted the letter I was sending to clients so others could use it.”

Will Heard

At last, something I can agree with. I am happy to acknowledge that the earlier clients were warned about the temporary disclosure rules the better for them.

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By User deleted
10th May 2007 09:18

Another angle for non-doms
Probably only a few people are concerned, but the figures are not insubstantial.

The practice of non domiciled UK resident taxpayers of arranging account closure just before a tax year end and a 'carousel' re-opening to convert income to capital on the 'source ceasing' basis is well known.

The Barclays letter specifically refers to 'transactions' in specific months-but as none of these is April the Revenue will 'lose' the abiilty to scrutinise this aspect. .


It may well be that they are not looking for it,.

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Richard Murphy
By Richard Murphy
09th May 2007 13:37

Oh dear, more of the 'poor old us' stuff
Will Heard really does pluck at the old heart strings rather well. Alas, I have to say it's to no effect. Not a single reasonable person will feel sympathy with the victims in this parable of woe.

First lets deal with the tax payer. As Roger Rabbit puts it, it is very hard to sympathise with many, if any of those who now need to declare tax on their offshore accounts. I've dealt with people in the past who have misdeclared for this reason. None believed they could save offshore and not pay UK tax legally. They hoped they could, of course, but that's not the same thing.

Second, the practitioners who don't know about this simply don't deserve to be in practice. Sorry, but they deserve all the claims for unmitigated penalties that might be coming their way after 22 June if they're that outr of touch with the reality of the tax world.

Third, those practitioners who do know and who have stuck their heads in the sand are negligent. I told people what I'd be doing for my clients within days of this being announced. I even posted the letter I was sending to clients so others could use it. And what was the general reaction from the 'great and the good'? That I was being premature. That's what they said. Wait and see was their suggestion. But now it's being said that 'If [taxpayers] did not hit the deck running on the day that these guidelines were announced then they have already failed'. I gave my clients the chance to hit that deck. If you didn't, that's your problem. Mass mailing's not that hard to do. You could, of course, still do so now. The letter's at http://www.taxresearch.org.uk/Blog/2007/04/23/help-for-the-practitioner/

And as for the banks who come in for criticism: well, I agree, they do have a duty here. And they've failed miserably in it. But is it really right to pass the buck to them now when any on the ball accountant has had a chance to do something about this? I'm not sure. That's just the ostrich approach to which Will refers in the article.

Isn't it time to get real? Practitioners do have duties. One is to be up to date. A second is to advise their clients. A third is to make sure as far as they can that the right amount of tax is paid in the right place at the right time. That's what tax compliance is. And it's possible. Anything else is just excuses. Just as much as thinking the Revenue will extend their deadlines is whistling in the wind, unless of course they do so on condition of rising fixed penalties. That's the only option I foresee.

Richard Murphy

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By hal44
09th May 2007 14:09

Aaaaaaaaaaaaaaaaaaaaah what a shame
When will we stop worrying about the fraudsters being caught out and start paying their taxes which we're picking up and the costs of applying the law?

HMRC should allow for mitigating circumstances, but why not uphold the basic principle of "Break the law and get done"? We spend far too much time arguing about silly principles like "The camera sign didn't have a black border" and ignore the basic premise "yes I was exceeding the speed limit".

And anyway, Mr Editor, why is being honest "blowing the gaff"? Sounds like you're as corrupt as the defaulting-taxpayers?

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David Winch
By David Winch
09th May 2007 14:27

The best option

I do think that the best option for accountants in general practice is to contact ALL their clients and draw their attention to the 'amnesty' and to the fact that, broadly speaking, anyone living in the UK ought to have shown on their tax return the interest arising on any offshore accounts. (I realise that there will be a small proportion of clients whose particular circumstances result in this income not being taxable - but these can be dealt with on a case by case basis.)

The accountants might sensibly also point out that UK tax has not been deducted at source from interest credited to these accounts.

After 22 June it will just be too easy for those contacted by HMR&C to blame their accountants, and for their new accountants to say, "If only your old accountant had told you, then all this trouble would have been avoided".

Who is going to get the blame? Not the dishonest taxpayers (who will blame anyone but themselves), nor the banks. It will be the accountants who did not contact their clients who will be 'for it'.

(And having contacted their clients I do think the best option will be to submit an initial notification by 22 June and the forms and payment by 26 November on the basis that 'near enough right will have to do in the circumstances'. Get some decent figures on the forms guys and stop bleating!)

David
www.MLROsupport.co.uk

P.S. I thought "offshore" meant anywhere that is not mainland England, Scotland, Wales or Northern Ireland - so, Nicholas, I don't see a problem with Eire and Cyprus being included as "offshore".

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Richard Murphy
By Richard Murphy
09th May 2007 15:17

More to say
I have more to say on this at

http://www.taxresearch.org.uk/Blog/2007/05/09/tax-amnesty-what-tax-amnesty-say-the-uks-accountants/

As usual, I seek to offer practical advice there, rather than a series of excuses.

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By Tony Crook
09th May 2007 15:26

Joint professional bodies' guidance
.. was issued on 20 April. See http://www.tax.org.uk/showarticle.pl?id=5460

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Richard Murphy
By Richard Murphy
09th May 2007 16:27

Nicholas is right
Offshore is a hobby horse of mine

But providing first rate client service has been a hobby horse for a lot longer and I'm still baffled as to the reasons people give for not doing it

In my book first rate client service is pretty much the same as covering your backside from risk

So why not stop moaning (as David rightly says) and do something positive? It's a double win

And clients will pay for it. That's another hobby horse as well.....

Richard Murphy

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Andrew Goodall
By Andrew Goodall
11th May 2007 11:28

Ignorance
Dennis Howlett’s dismay at some accountants’ apparent ignorance of the disclosure facility is understandable. How a practising accountant could have missed (a) HMRC’s original announcement (admittedly, a very short press release, and not widely reported at first in most of the national press) and, more to point, missed (b) the leading item on the front page at www.hmrc.gov.uk – it’s been there for almost four weeks – and missed (c) all of the coverage in AccountingWeb and other tax/accountancy media is beyond me.
Andrew Goodall

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By mikewhit
09th May 2007 16:47

Net profit
On a common or garden 'ordinary account' the bank charges outweigh any interest anyhow !

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Richard Murphy
By Richard Murphy
11th May 2007 08:35

Dear Offshoreman
I'll ignore the invective in your comments.

I will deal with the issue.

As Mark Lee rightly says, there's no accountant who can ignore this issue. With the best will in the world clients can surprise you. So I did send a letter to every one of my clients. Even my wife.

I've had no take up. That does not surprise me. But the risk has been managed. That's what this is about.

Good practice management combined with a commitment to tax compliance is about: making sure both the practitioner and the client can sleep at night.

And offshore has never helped that.

Richard Murphy

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David Winch
By David Winch
09th May 2007 17:37

Wouldn't it be fascinating to know . . .

Wouldn't it be fascinating to know:

- How many letters the banks have sent to customers?

- How many customers have done something (like contacted HMR&C or their accountant) as a consequence?

- How many notifications are being sent to HMR&C under the amnesty?

My feeling is that most people who are going to do something in consequence of a letter from their bank will do it within a fortnight (at the outside) of receiving the letter.

So maybe accountants up and down the country are already deluged with clients asking about the amnesty - or maybe there has been no more than a trickle?

I wonder how many customers are adopting the ostrich position, or hoping HMR&C are bluffing, or thinking that anyway the interest wasn't taxable so they don't need to do anything?

Maybe some customers have declared the interest but as UK interest (in the boxes on page 3 of the standard tax return). If so, presumably HMR&C will treat them as not having declared the interest, since they have declared no foreign income.

I would expect that after 22 June HMR&C will go firstly for those with large balances and the self-employed - but who knows?

I await developments with interest!

David
www.AccountingEvidence.com

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By billgilcom
11th May 2007 11:16

Additional Thoughts for professionals
Having just reread the guidance I must admit that first time round (and second) I missed the sting in the tail for evaders that fell into the heinous category of tax evasion on page 4 point 3 ..... " or others whose circumstances would result in a criminal investigation in accordance with our published Criminal Investigation Policy"

In addition to the thoughts of Mark Lee I would also add that practitioners would have to consider if their client's activities are such as to bring them within the HMRC RCPO - see my link http://www.wamstaxltd.com/SCI_or_CIF.html and press on RCPO.

Additionally you will no doubt find the HMRC Published Policy interesting. You can find it by following my website and on the "Links" tab press the Inland Revenue link and put Criminal Investigation Policy in the search box presented on the HMRC site. Alternatively you can press this link

http://www.hmrc.gov.uk/prosecutions/crim-inv-policy.htm

Their is also perhaps a necessary word of caution in that if your client didn't tell you about the offshore account before could he be keeping things back even now. We owe our clients a duty of care and one thing to remember is that the ODF is for FULL Disclosure not a half hearted attempt to further deceive the authorities - Of course not forgetting the poor hard working accountant who possibly doesn't want to be ferreting about in his client's records to check that its a full disclosure. If we fail to carry out reasonable checks then sadly we could be exposed in the future and things come back to haunt us when we least expect it.
regards
[email protected]

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David Winch
By David Winch
11th May 2007 08:57

Practitioner's Diary

Interesting comment on AccountingWEB's Practitioner's Diary of 7 May:-

"Just had some STUPID woman on the phone asking questions about the offshore tax amnesty. I admit I had to go to the HMR&C website to read up on it while I was speaking to her. I haven't taken much interest in the detail of the amnesty since I am working on the basis that my "clients", by definition, won't be needing to take advantage of the amnesty. If any of them do, they will no longer be "clients" on the grounds that they have been lying to me all along."

It seems that this caller did not become a new client of the practitioner following her request for advice.

David

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By AnonymousUser
11th May 2007 10:50

Dear Richard
No invective was present in my comments.
A little sarcasm, perhaps.
A small pop at the po-facedness of your usual position on offshore matters.
Incidentally, it is not "offshore" that fails to declare income, it is the client.

I actually think your response to the HMRC disclosure deadline was perfectly reasonable. None of us can really tell what our clients get up to. Most will not appreciate a full-on forensic examination of their current and historic financial affairs each year, in order to complete their tax returns. We have to rely on their common sense and honesty to an enormous extent, in order to provide a cost- effective service. After twenty years in practice, I am frequently surprised by people I thought knew better.

I am surprised by the lack of HMRC publicity for this. Not everyone has a tax advisor. Is the route for the unrepresented taxpayer the same?

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By AnonymousUser
10th May 2007 17:44

The accountant doth protest too much?
I'm surprised that R Murphy had to write to any of his clients on this. Surely, as such a principled individual, he would have no clients that would need to be written to on the matter.

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Dennis Howlett
By dahowlett
10th May 2007 20:54

What's the problem here?
Richard has laid out a perfectly reasonable response. I can't see any defence for those who choose to evade tax about which I say more here.

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