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Tax haven secrecy to go

2nd May 2018
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Paradise beach

To outside observers, like a punch-drunk prize-fighter, the government seems to be perpetually on the ropes, ducking and diving in an attempt to avoid lethal punches, many from its own side.

In the last week, the home secretary has been forced to resign over a scandal that could throw immigration policy into even greater uncertainty, while the Prime Minister’s flexible policy approach to leaving Europe and more particularly the customs union, is being threatened by a powerful faction within the Conservative party. 

To compound the problems, leaks seem to be appearing on a daily basis, as the internecine fight hots up.

Such has been the controversy over these issues that many readers may have missed another major parliamentary defeat that could have a significant impact on the accountancy profession and our clients.

Under the provocative headline “'Dirty money': U-turn as Tories back plans to make tax havens transparent” the Guardian provides the background to a backbench revolt that has forced reluctant ministerial hands.

With effect from 2020, a proposal from the potent cross-party duo of that scourge of the tax avoidance industry Dame Margaret Hodge and another former minister Andrew Mitchell has led to a climb-down. The consequences that British overseas territories (many of which are tax havens) will be obliged to create public registers of corporate ownership.

Following on from the Panama Papers revelations and many other examples of potential wrongdoing generated by investigative journalists and whistle-blowers, this could have a devastating effect on those seeking to hide their wealth and avoid (or dare one suggest evade) taxes by hiding significant wealth in the British Virgin Islands, the Cayman Islands and 12 other territories.

It is hard to imagine why the British government would have tried to prevent such legislation going through, given that it should have a positive impact on its own coffers. In addition, it seems important to emphasise that those who are doing nothing wrong should presumably have no major issues regarding this change.

However, I can see one immediate problem that is likely to arise when the big day comes in a couple of years’ time. HMRC has been singularly unimpressive in its efforts to make any money from the ultra-rich in recent years, primarily due to lack of resources.

If it is suddenly presented with hundreds or even thousands of non-taxpayers who become what should be low hanging fruit overnight but are represented by the cream of the accountancy profession and the best barristers that lots of money can buy, will the department merely stick its head in the sand yet again and allow what could be billions of pounds of revenues to go uncollected?

One would hope that in these circumstances Philip Hammond is already putting together a budget for the recruitment of a significant number of new, top-quality staff members to help reap the benefits of this major development. In reality, given the government’s other problems such as those outlined at the start of this article, anyone with bank accounts in the 14 overseas territories will probably lose no sleep for the foreseeable future.

However, there could be a lot of work on the horizon for those of us with clients who have quietly been sheltering their wealth in the sunshine.

Replies (5)

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By vstrad
02nd May 2018 10:58

It's not at all "hard to imagine" why the Government might object to this plan. The BVI etc. are self-governing territories, subject to OECD scrutiny, and this smacks of colonialism.

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Replying to vstrad:
By SteveHa
02nd May 2018 13:40

Not to mention that, the Conservative party in particular, could have significant financial contributors, and possibly even some of its own ministers implicated.

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By Justin Bryant
09th May 2018 11:29

Any determined fraudster etc. can surely simply sidestep this by using a trust instead of a company to hold dodgy assets and the beneficial owner of a private trust company can be anyone totally unconnected to anyone or anything dodgy, so this seems a complete waste of time. See:

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Adrian Lawrence
By AdrianLawrence
04th May 2018 12:36

Only a proportion of funds in those tax havens are held by British tax payers in the first place, and given all the trailing of this in the press, no doubt many will have moved their "hidden assets" to none-dependent territories.

I am certain also that if someone is intent on hiding wealth from HMRC then they will arrange for a proxy to appear on the planned public register rather than their own details.

That said there will be some low hanging fruit for sure.

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By Ian Anderson
05th May 2018 10:18

Yet again the government and media is missing the point. None of the individuals using this type of tax AVOIDANCE are breaking the law. So stop chasing them.

Why not pressure parliament to pass legislation making the use of these tax havens illegal. Or are the MP's too damned cowardly to do this?

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