Offshore account holders to receive 'intimidating' letters

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HM Revenue & Customs (HMRC) is planning to send letters to many people who own offshore bank accounts, as part of a scheme designed to find the best way of discovering tax fraud associated with offshore accounts. The letters ask for an explanation of why there is no tax liability arising from the bank account, and require a reply within 30 days. Authorised agents will receive copies of letters sent to their clients.

The Tax Faculty at the Institute of Chartered Accountants in England & Wales (ICAEW), which has seen a copy of a letter, says: 'there are plenty of people who have no intention of avoiding their tax obligations but who are under the impression that overseas income is not taxed in the UK. People in this category may be misinformed or badly advised, and while ignorance of the law...

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28th Jul 2005 09:49

Not so threatening
One of our clients has had one of these and they aren't that scary. In fact they include a nice, clear (by Revenue standards) list of sensible situations and explanation of their consequences. As I understand it, they are going out to people who have overseas accounts and are not showing these accounts in their Returns.

In our case they unearthed a US Current account and a weird accumulator account in the Isle of Man. So there isn't any ugly downside to it but unfortunately I can't tell the source of this information, although I guess it's the Isle of Man passing info.

I guess if you did have an offshore account and weren't declaring the income in that account they might be seen as intimidating but then you can't really blame the Revenue for that.

In comparison with their "we've got your 2004 Return but you might be doing something wrong here so think carefully next time" letters this one is a real pussycat.

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28th Jul 2005 12:27

Revenue Letters
but how would the Revenue know that client's have an overseas bank account without having issued a section 20 notice?? Is this just a fishing exercise??

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29th Jul 2005 12:02

HMRC sources of offshore information
Nigel, as the article says, quoting the Revenue: "Much more information is becoming available to us through various sources about the holders of such accounts."

It has been clear for some time that the the amount and quality of the information the Revenue has been receiving, particularly from the Isle of Man and the Channel Islands, has increased substantially in recent years. I have been involved in several large enquiries recently where it was obvious that the Revenue had chapter and verse about offshore accounts and trusts, information which could only have come from the offshore banks involved.

Special Compliance Office (or Special Civil Investigations as it has recently been renamed) in Liverpool has dozens of Inspectors conducting enquiries into the holders of undisclosed offshore investments and most of these are prompted by specific information obtained without the issue of a S20 Notice to the client. Many of enquiries are started through local tax offices without diclosing that SCO/I is behind the enquiry. I have been consulted about one case recently where an apparently innocuous request for phone bills was followed by a much more specific "Why has your client been regularly ringing an offshore bank?" I suspect the inspector knew exactly what he was looking for before the bills were sent in.

I would always ask a client when an enquiry starts whether they have any offshore investments or assets and would warn them that if they have, there's a good chance that HMRC will already have details. This is obviously followed by a stark warning that failure to disclose could result in prosecution.

David Cunliffe

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