Seek amnesty or risk investigation as HMRC’s tax net tightens on offshore bank accounts

With a new round of tax investigations being launched into customers of HSBC in Switzerland, HM Revenue & Customs’ (HMRC’s) drive against holders of undeclared offshore bank accounts is heating up. Waiting to come forward could result in higher tax and penalties, so what are the tax amnesty options?

Stolen data

HSBC discovered in December 2008 that a disk of client data had been stolen from its office in Geneva. It is understood that this data was passed to HMRC late last year. Holders of HSBC Swiss accounts shouldn’t therefore be surprised to find an HMRC enquiry letter land on their doorsteps in the near future.

Those worried that they may be affected would be well advised to come forward now and make a disclosure rather than waiting for HMRC to find them.

Liechtenstein disclosure opportunity remains available

The Liechtenstein Disclosure Facility (LDF) is still open and offers the most generous disclosure terms of any amnesty so far. However, the LDF is not available if HMRC opens a tax investigation first so there is a risk of far higher tax, interest and penalty charges for playing a waiting game.

The LDF appears to have been more popular than the tax authorities expected; HMRC last year revised its predicted yield with the LDF from £1 billion to £3 billion. The terms of the agreement between HMRC and the Liechtenstein government decree that Liechtenstein banks must identify all of their UK customers by October 2011. The banks will then have three months to notify them of their obligations.

Once a notice has been received from a Liechtenstein bank, the customers then have 18 months to either declare themselves as tax compliant, or they must register to make a disclosure under the LDF. Rumours abound, however, that with negotiations still going on between the UK and Swiss authorities regarding Swiss bank accounts, the October deadline may be extended.

Amnesty and prosecution figures

The LDF remains the most attractive opportunity that will be afforded to the holders of undisclosed offshore bank accounts. Figures revealed at HMRC’s Compliance Reform Forum in June 2011 demonstrate the danger of not taking advantage of the amnesties offered by HMRC.

The previous Offshore Disclosure Facility (ODF) and New Disclosure Opportunity (NDO) have given rise to 3,000 enquiries and 10 alleged criminal prosecutions for those who either failed to make a disclosure or made an incorrect disclosure.

Similarly, the aftermath of the tax amnesty offered to medical professionals in 2010, the Tax Health Plan, has seen 500 enquiries and six criminal prosecutions so far.

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