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HMRC cracks down on offshore tax schemes

10th May 2013
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HMRC has launched a fresh investigation into offshore tax havens, working with US and Australian authorities on data which has revealed individuals and tax advisers involved with tax evasion.

In total 400GB of data is being jointly analysed by the authorities, which has already identified 100 companies and individuals using complex offshore structures, who are currently under investigation for tax evasion.

Up to 200 accountants, lawyers and other professionals advising on the tax structures were also identified by the investigation, who HMRC says will be “scrutinised”.  

The companies and trusts using the structures have been identified in areas such as Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands.

The data also includes information that could be shared with other tax administrations globally.

HMRC advises those using the structures should review their tax arrangements and seek advice to make sure they’re compliant with UK tax law. Failure to do so could result in publication of identities, criminal prosecutions or “significant” financial penalties, it added.

Chancellor George Osborne heralded the data as “another weapon in HMRC’s arsenal” and gave a clear, simple message: “If you evade tax, we’re coming for you,” he said.

Partner at Crowe Clark Whitehill John Cassidy said: "The latest data to fall into the hands of HMRC is unprecedented not only in terms of quantum but also quality. HMRC has developed more sophisticated computer programmes and data mining techniques, and are deploying significant staff numbers to increase their capabilities in this arena,"

"Whether that data comes from agreements with overseas fiscs, is stolen from an offshore bank or comes from some other source is largely irrelevant as the fact is, it is in the hands of HMRC and will be utilized accordingly." 

Jennie Granger, HMRC commissioner and director general for enforcement and compliance said while there’s nothing illegal about an international structure, they may involve tax evasion or avoidance.

“What has to stop is using offshore structures to illegally hide assets and income,” she said.

Cormac Marum, a former tax inspector and head of tax advisory at UK200 Group firm Harwood Hutton agreed with Granger on offshore structures being legitimate as long as all income and gains are declared to HMRC.

“It’s also perfectly legitimate for accountants and tax advisers to give clients advice about such structures and arrangements,” he added.

“All decent advisers will abide by professional ethical guidance and tell clients that they need to disclose any income and gains fully to the taxman. Some clients may ignore this advice. If an accountant or tax adviser knows that their client is deliberately submitting an incorrect return, they should cease to act.”

BDO partner Philip Fisher also commented about the investigation in his latest AccountingWEB blog“If there really have been 200 people practising our profession or something very close to it while promoting criminal activity, that is a severe embarrassment from which it may take us all years to recover,” he said. 

Relatedly, there has also been a spate of professional negligence claims against the promoters of tax avoidance schemes, in a bid to clamp down on avoidance in the UK. 

Replies (5)

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13th May 2013 18:07

tax avoidance

In our view, HMRC should refrain from making announcements through the press that potentially damage the reputation of law biding professionals and their clients because generic statements offer no credible advice or guidance to UK taxpayers. 

When reading some articles they give the impression that all offshore trustees are up to mischief at best and committing illegal acts at worst and this is simply inaccurate and unfair to treat all situations and people with the same broad brush

There are set procedures and compliance manuals which set out how disputes, claims, reliefs, investigations etc are administered by HMRC on behalf of the UK Government. HMRC should stick to the integrity of these manuals as they form the operating system from which professionals seek to comply with the law on behalf of their clients. If the legal framework and  procedures dont offer the solution required by Government surely HMRC should invest time in improving them rather than "going public" with seems to impinge on the taxpayers rights such as "reasonable treatment" , "confidentiality" and  "fair trial" which are basic human rights.

"Going public" may also prevent investment in UK businesses seeking to raise cash as equity investment, as these fund raising exercises often capture investment with the help of tax reliefs and allowances. The potential damage to reputation that investors face may prevent new start up businesses from finding equity investment at a time when the Government is also failing to encourage banks to lend to such enterprises which lie at the heart of growing businesses in the UK.

Taxation is too complex for the average person in the UK and they cannot differentiate between aggressive tax avoidance and good tax planning and so they should not be pilloried for not having the knowledge to make an informed decision as both planning and avoidance are lawful but seemingly press coverage of aggressive tax planning may damage a persons reputation or even stop that person earning a living. We think the solution for UK taxpayers rests with the DOTAS ( disclosure of tax avoidance schemes) which could in part be extended so that professionals can apply for clearance of sophisticated tax planning ideas for approval as a matter of routine. It happens in other countries and puts pressure on professionals to be more conservative in their approach and would place pressure on HMRC to make a timely and fully considered approval or rejection of the idea on a private and confidential basis, over a short period of say 30 to 90 days. At the moment , prior approval of claims to reliefs etc are too narrow and too inflexible and there seems no system for prior approval for most tax planning and that seems unfair. If HMRC invest time and effort in this regard we think it offers taxpayers a means of understanding their tax position.  Currently, we believe HMRC are  frustrated with their over-regulated and confusing systems and would welcome some means of  advanced approval procedure and we are sure the court would favour it in preference to the increasing volumes of cases in the pipeline




Thanks (2)
By The Black Knight
15th May 2013 11:50

Wish they would quit talking and get it on

Chancellor George Osborne heralded the data as “another weapon in HMRC’s arsenal” and gave a clear, simple message: “If you evade tax, we’re coming for you,” he said.

Get on with it then!

It is getting difficult to take HMRC seriously all of their statements sound like a manifesto of empty promises.

The easiest way of dealing with tax evasion is to bang a few criminals up and take their houses under the POCA.

I Agree with the above poster that there is a correct way of dealing with these matters (that's what we have the courts for) not playground bully boy tactics.


Thanks (0)
By andrew.hyde
15th May 2013 11:51

In a nutshell...

...what you're saying is that HMRC should be cooperating in the design of 'sophisticated tax planning ideas'.

If 'sophisticated' means what I think it does, then I'm really not sure if that's a realistic expectation.

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15th May 2013 13:38

Sophisticated tax planning

I guess all tax planning is sophisticated.......I am not talking about dancing on loopholes either, that is what DOTAS is for and should follow through to Court........Nor am I talking about tax evasion as that is illegal and should be acted against......... what I mean to convey is that there are so many legal interpretations and sets of circumstances that a taxpayer can no longer be sure of their own tax position if their circumstances are in anyway complex.....and so ........HMRC should extend their efforts in helping taxpayers under the pressure of time constraints and the guiding light of the Sheldon doctrine ......UK Taxpayers need certainty, so that they can conduct business, have loans and live their lives, but they don't have it!

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By michaelblake
15th May 2013 16:25

Who needs complex overseas structures

As I read it HMRC are trawling for 

companies and individuals using complex offshore structures, who are ..(by implication using them)  for tax evasion. 

and so they should be.

If then as a tactic HMRC make an announcement to warn people that is what they are doing and to warn that it would be better for people who are guilty of evasion to come forward and admit that they are evading tax, rather than wait for HMRC to come knocking, that strikes me as a very good use by HMRC of  limited resources. Those acting honestly have nothing to fear and I do not read the HMRC press release as saying anything different to that, viz

HMRC advises those using the structures should review their tax arrangements and seek advice to make sure they’re compliant with UK tax law. 

I would suggest that without exception those using complex overseas structures will know whether they were intending to be compliant with UK tax law when they signed up to using those structures, or were seeking to hide from the Revenue and evade tax. 

If it is a question of using a complex overseas structure to avoid tax rather than evade tax the users might look to the recently issued 160 pages of so of guidance issued by HMRC on GAAR to get a steer. I really do not have a lot of sympathy for anyone who finds  themselves in a predicament not knowing whether their complex overseas structure will be regarded by HMRC as abusive. As Dawn Primarolo when Financial Sec to the Treasury under Gordon Brown in a parliamentary debate of tax avoidance warned many years ago  "Those who play with fire should expect to get their fingers burnt"









Thanks (1)