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HSBC Jersey clients face tax d-day

11th Dec 2015
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HMRC have sent letters to HSBC Jersey account holders asking them to declare any undisclosed tax liabilities – or face a tax evasion investigation.

The letters from the tax authority give recipients until 31 December to sign a declaration that they owe no UK tax on their offshore assets. The FT reported that the letter warned HMRC “may start a detailed investigation into [their] tax affairs” if they do not reply.

“We are not saying that these taxpayers have done anything wrong. If they are confident that their tax affairs are above board, we ask them to fill in a certificate telling us so”, an HMRC spokesperson said in a statement. “If they are unsure, we suggest they seek urgent advice from a tax professional and, if tax is due, they must make a disclosure and pay any tax due.” The spokesperson told AccountingWEB that HMRC had already heard from 10% of taxpayers contacted.

HSBC’s Jersey account holders have been in HMRC’s sights for the past three years after a whistle-blower leaked their data to the tax authority. Around half the leaked accounts belonged to UK citizens. “In the past HMRC has said that they cannot start criminal investigations using leaked data because the data would not stand up in a criminal court”, said Rebecca Busfield, partner at Watt Busfield Tax Investigations. “However, it is possible that the quality of information they have received this time is more credible.”

For political economist Richard Murphy the letters are a positive, more confrontational step. They’re also a portent into how HMRC will be dealing with offshore taxable income in 2016. “Next year, the revenue will be getting an awful lot of information from an awful lot of tax havens. It would appear to me that one of the first things they need to be doing is contacting all the people they’ve received information upon,” said Murphy. “That person is then on notice that if they don’t do so, they’ll be subject to enquiry. And if that enquiry finds evidence of taxable income that hasn’t been declared they face prosecution.”

According to Adam Craggs, partner and head of RPC’s tax disputes team, recipients of the letter need to be extremely cautious. Craggs told AccountingWEB he was aware of clients that had received the letter. “Anyone that does receive this letter must seek expert advice because if they were to sign it, and it was false, it would be very easy for the revenue to secure a criminal conviction; a slam dunk as they say,” said Craggs. “It’s not the usual ‘to the best of your belief, knowledge and understanding’ etc. This is an unequivocal statement or assertion. Therefore you need to be absolutely certain that your statement is truthful.”

With the Liechtenstein Disclosure Facility (LDF) also winding up on 31 December, these letters appear to HMRC’s big play on the Jersey account holders. “From HMRC’s perspective, it’s a clever tactic,” said Craggs. “If the letter is ignored - and people are entitled to ignore them - I imagine they’ll be scrutinised very closely by the revenue.”

The government announced tougher rules on tax evasion this week. Under the new rules it will be an automatic criminal offence to hold undisclosed offshore assets or income, irrespective of whether the person intended to evade UK tax or not. A conviction carries a potential six-month custodial sentence. “Following the backlash by the public in relation to HMRC’s handling of the data leaked from HSBC in Switzerland,” said Busfield, “HMRC may be on the hunt for some offshore prosecution prey.”

Replies (4)

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By Lynda Williams
14th Dec 2015 12:16

HSBC Jersey account holders

I assume this applies to UK resident account holders only

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Francois
By Francois Badenhorst
14th Dec 2015 14:50

Yes, that's right

Almost half of HSBC Jersey's account holders are UK residents. 

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By 0705736
14th Dec 2015 16:36

Offshore assets

"... it will be an automatic criminal offence to hold undisclosed offshore assets or income, irrespective of whether the person intended to evade UK tax or not"

So anyone with a second property abroad (for example) will in future have to declare the fact to HMRC or be fined, even if they receive no income or gains from it?

What will be the procedure for declaring such assets?

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By Johhny
15th Dec 2015 07:36

criminal offence

The wording is a bit loose at the end. It will be an automatic criminal offence if offshore income and gains are not declared, rather than offshore assets not being declared.

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