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Isle of Man / Guernsey banks handing info to HMRC

Letters received in recent days will have caused a few people to choke on their Corn-Flakes. The banks in the Isle of Man and Guernsey are about to pass details for the first time to the UK tax people – the feared HMRC. New clients have already come to us bearing these bank letters and wanting to come clean to HMRC. Wise move.

This comes about because the Isle of Man became the first offshore territory to implement the automatic exchange of information within the EU. This it has done to show it wants nothing to do with tax evasion. Guernsey is also passing information to HMRC. (Jersey has instead upped the tax they deduct to 35%, preserving confidentiality…for now.)

Until now if you had money in the Isle of Man or Guernsey you had two choices – let your details be passed to the UK HMRC – and get your interest paid gross, or maintain your secrecy and have some tax deducted by the IoM/Guernsey bank. Those days are gone.

The banks must now inform HMRC of your details and the interest you have earned. These new rules started from July 2011 and the first notification will be of interest earned in the year to 5 April 2012.

This raises an interesting point. You may be thinking that if the interest is small HMRC will leave you alone. Unlikely. The banks have recently dropped their savings interest rates to pitiful levels. 0.1% per year is not unknown. This means that even though the interest you got was tiny, it could suggest to HMRC that you are sitting on a much larger pile of cash.

For example of your Isle of Man interest was just £100, that could have been earned from a deposit of £100,000.

The other thing is that HMRC can go back 20 years. So long as they know you have money offshore, which you haven’t told them about, they will assume that the undeclared income is bigger in earlier years.

HMRC will also be very interested in the original source of the money. If it was invested in the past 20 years then you might also owe tax on that. For example if you did some consultancy work and put the money offshore. The income should have been taxed when earned and so HMRC would want their money.

Good news, though, for the typical offshore investor. Most people opened these accounts in the 1980s and 1990s. Money lodged over 20 years ago cannot be taxed by HMRC – they are too late. So the only thing to be taxed in the interest received in the past 20 years.

Don’t be worrying about going to jail. Unless HMRC has previously investigated you, and through that you continued to hide an offshore account, they will just take money off you. Tax, interest and penalties.

Our firm has been specialising in tax investigations like these for 20 years, and so can reassure you that we can help out even where the information is incomplete. We have built up a database of typical offshore interest rates. Thus the fact that you may be missing some or many bank statements will not stop us sorting out your tax.

The clock is ticking until all holders of undeclared Isle of Man and Guernsey accounts get a letter from HMRC. Now that really will make them choke on their Corn-Flakes!

Trust me – as the Tax Inspector in the Harry Redknapp case said – you will get an easier ride if you approach HMRC before they approach you. Don’t do it alone though!

Read more about what to do if you missed the offshore tax amnesties – whether to speak up or keep quiethere.

Is this a tax investigation? read here

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.

Harry Redknapp and the dog walk free from tax case BBC TV

Harry Redknapp and Milan Mandaric have walked free after a jury found them not guilty of tax evasion (posh term ‘cheating the public revenue’). My national BBC interview about the fall-out from the case is at www.YouTube.com/HustonTV

This means Redknapp’s dog Rosie – if she’s still around – can stop biting her claws. She was accused of being the tax-fiddling dog as the Monaco bank account was opened by Redknapp in her name, after he flew to Monaco to open it.

This case and its ending is an embarrassment for HMRC and raises the following questions:

  • Why did HMRC spend a fortune bringing this prosecution?
  • What singled Redknapp out for prosecution?
  • Should HMRC stop these high-profile tax prosecutions?

Why did HMRC spend a fortune bringing this prosecution?

They don’t take many suspected tax-fiddlers to court. In fact the vast majority – over 99% are settled quietly with a payment of tax, interest and penalties. Many high profile people have paid up for large tax investigations in the past and the matter has been kept secret due to taxpayer confidentiality. Under new legislation there will be public naming of people who fiddle more than £25,000 in tax, but those names are yet to start appearing, as the law is fairly new.

This case was taken as HMRC was given information which came out of the larger Police investigation into bungs and bonuses in British Football. It is said that the big investigation cost some £8 million.

Information also from HMRC’s key witness – journalist Rob Beasley – suggested the money lodged offshore was a bonus. In Court Harry Redknapp said that he had lied to the journalist but was telling the truth to the Court.

What singled Redknapp out for prosecution?

The factors which would have meant HMRC thought they had a strong case included:

  • Redknapp had not admitted to the account in a previous tax investigation. (Most tax prosecutions are people who withheld information in a previous investigation.)
  • He had gone out of his way to set up the account. He flew to Monaco and set it up in a false name – his dog’s. The Account was named Rosie 47. (Harry was born in ’47.) There’s rarely an innocent motive for such behaviour.
  • HMRC had the evidence of the taped conversation with the journalist admitting the lodgements were bonuses.
  • With falling tax payment figures, HMRC may have been keen to have a high-profile tax prosecution – to encourage others to come clean.

Unfortunately juries are fickle things, and HMRC called it wrong on this one.

Should HMRC stop these high-profile tax prosecutions?

Interesting question. For my part I don’t think they should stop them but they need to go into Court knowing these cases are different. They need to use Celebrity lawyers ready to fight the case on the soft woolly aspect of the case, not just the boring numbers stuff.

Redknapp used what I call ‘The Celebrity Defence’. He basically said ‘I’m a simple man, don’t really understand these things…I leave it all to my accountant’.

This defence was used in the last big-name tax court case – the tax prosecution of comedian Ken Dodd – way back in 1989.

The only other big name to be publicly done for tax evasion in my 25 years in tax was Lester Piggott – the jockey. He was found to have evaded tax on millions, using false names and overseas bank accounts.

So – 25 years – 3 big-name prosecutions. Not very many. And certainly not enough for the general population to get the HMRC message.

HMRC wants people to believe that the big guys get caught too. Sadly with such numbers the man-in-the-street thinks HMRC is out to get him, and the big names get a light touch. Hard not to think that!

Now that Harry Redknapp can put this stressful case behind him at least he has something to take his mind off it. Does he want a new job managing England?

 

This article will also appear in the Belfast Telegraph

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.

Redknapp & the tax-fiddling dog

In my YouTube video (Tax Evasion for Pets) Kim the tax fiddling collie opens her own bank account… 

As the trial progresses we will learn more about what Redknapp was allegedly up to, but this article should help you understand what went on, according to HMRC’s lawyers…

Back in the day – when I was a Tax Inspector investigating suspected tax fraud, it was not unusual to find money stashed away in other people’s names. The fiddler would often set up accounts in the name of his or her spouse, parents or children. I must say Harry Redknapp’s case – where the account was named after his dog – is taking things to a whole new level…

When Redknapp flew to Monaco to open the account, that account was apparently called ‘Rosie 47’ – named after his dog plus the year of his (not his dog’s) birth. As the trial continues we are yet to hear from Mr Redknapp about the money lodged to this account, but it seems that when quizzed he kept changing his story about how the money ended up there. It was an investment…a gift…a loan…employment income…none of these…

This is no surprise to those of us handling tax investigations, albeit now on the side of the client. When someone is backed in a corner he panics. He starts spouting off random explanations for where the money came from. He thinks he can guess which answer shows him in the best light. When probed further he retracts that line and takes another.

The real reason Redknapp is in the dock is not for failing to declare the money (HMRC could have settled that quietly with him.) The real reason is that he was under investigation by the Revenue concerning previous bonus payments – and ‘forgot’ to mention the Monaco account and lodgements.

In almost all high-profile prosecutions there is an aggravating factor. The ancient Lester Piggott tax case is another example. There, as in the Redknapp case, in the process of a tax investigation the suspect thought it was still a good idea to conceal the truth. That’s when cuddly Mr Tax-Man turns nasty and starts thinking about court!

This case should provide good viewing over the next couple of weeks, especially if Harry Redknapp chooses to take to the stand and try to explain what he was at. One wonders…is there an innocent reason to fly to a tax haven, name a bank account after your dog, and then conceal its existence from your accountant and the tax people?

HMRC and the Police believe the money paid into Redknapp’s account by the former Portsmouth FC chairman Milan Mandaric were part of Redknapp’s share of a commission on transfer payments. The prosecution is of both Redknapp and Mandaric for ‘cheating the public revenue’ by avoiding tax on the payments. This is standard wording used in tax trials.

Some readers will be surprised that Redknapp hid the money from his accountants as well as HMRC. In fact this is normal practice with people cheating HMRC. They know that by telling their professional adviser, that person will be duty-bound to declare it to HMRC. If they change accountants over the row, then the new accountant should learn about the issue from the former one.

If you, or one of your pets, have been suspected of tax evasion, make sure you seek specialist tax help as early as possible. It could save you many thousands and could keep you out of jail. Call Adrian Huston or Felicity Huston on 028 9080 6080.

My tax question for Tony Blair

My latest YouTube video poses the following question for the former Prime Minister:

Tony Blair – have you been tax resident in the UK each year since you left Downing Street?”

My reason for wanting that question answered is my suspicion that with the low tax bills his companies pay, and the very low number of days Tony Blair spend in the UK, Tony Blair Inc (the casual name given to his myriad of companies and partnerships) benefits substantially from him being non-resident for tax purposes.

I go into more detail in my Blog post which has had fantastic reader numbers, called Tony Blair’s Tax Bill Mystery.

None of the statements I have seen which were put out by Tony Blair’s spokesman have confirmed that he has remained UK resident for tax purposes since leaving office as PM.  If he is non-resident then this could go some way towards explaining how one of his companies managed to spend £8 million in tax-allowable expenses in the year to 31 March 2011. (It could have been paid to offshore entities ultimately controlled by Tony Blair).

You can access the video here or via my free tax articles website www.YouTube.com/HustonTV

Tony Blair's tax bill mystery

May 2013 Bloomberg quotes Adrian Huston and puts Adrian’s tax questions directly to Tony Blair.  Read their article here.  My blog below was published Jan 2012 and has been read by thousands.

The Daily Mail reports that former Prime Minister Tony Blair’s earnings have soared by 42% to £12 million.  Despite this the tax bill was only £315,000.

Wouldn’t we all like a situation like that?

Many of his financial dealings are hard to pin down due to the use of partnerships (Limited Partnerships and Limited Liability Partnerships) and business structures which do not have to publish full accounts of their income and expenses. This level of complexity, something he criticised when in power, is not necessary to organise the activities of one man, no matter what his spokesperson says.

Despite the complexity, figures are available for Windrush Ventures Ltd.  Its only share is owned by Bircham and Co Nominees Ltd. Thankfully company law requires the accounts to show who is really in control.  The accounts state “The ultimate controlling party… is ACL Blair.”

Or Tony to his friends.

Anyone can access these accounts, and I have details of how you can do so at the end of this article. Having analysed them I can share with you some of the interesting bits.

Key points of Tony’s company accounts for Windrush Ventures Ltd are:

  • Turnover was £12 million

  • Salaries, including to the directors, totalled £2.3 million

  • Premises rent etc totalled £637,000

  • The accountants made £44,000.

  • No dividend was paid.

  • The corporation tax due was just £315,000

  • This leaves over £8 million in expenses, with no explanation.

  • Three directors served in the year to 31 March 2011 – Catherine Jane Rimmer – British(DOB 21/3/67), Jason Samuel Searancke – a New Zealander (DOB 28/4/68) and Joanne Alice Gibbons (Jo Gibbons) – UK resident (DOB 25/12/63 – who resigned on 7 October 2010.)

  • The highest paid director received in total £200,000 in the year.

  •  In total the directors earned £481,000.  One director received £70,000 compensation for loss of office.

It is not clear whether these accounts include the fees Tony Blair receives as an adviser to JP Morgan – the American bank, or his fees from Zurich International.

The big question here is how did this company spend over £8 million in ‘expenses’?  Most of them were tax-deductible as the small tax bill proves. Of course there will be travel and accommodation costs, and normal office costs, but a million pounds would go a long way in handling all that.

In response to the Daily Mail a spokesman for Tony Blair said “

‘Tony Blair continues to be a UK taxpayer on all of his income worldwide. There are more than 120 people working on all his activities around the world. His companies are all UK registered for tax purposes, and the corporate structure has nothing to do with tax arrangements, but is simply to effectively administer his activities.

‘These figures are not his earnings from Windrush but are the costs of all that Tony Blair does through Windrush. The Windrush accounts are prepared in accordance with the relevant legal, accounting and regulatory guidance.’

As a tax consultant with hundreds of British clients abroad, I have a theory. One perhaps an investigative journalist or blogger might like to pursue.

Is Tony Blair actually non-resident for tax purposes.  If he is resident for tax purposes then why doesn’t his spokesperson just say so. 

In my scenario, so long as he is deemed to be working full-time abroad, and his overseas activities could support that line, then this option may be available to him.  To keep this special tax status he will only be allowed to be in the UK overnight on 90 days per year. That restriction is probably not a problem given the time he spends in the Middle East.

Maybe some of this explains why he isn’t Lord Blair, yet.  Peers (Lords) must be “resident in the UK for tax purposes and accept the requirement to remain so”.

Perhaps someone could ask Tony directly:

1. “Are you resident in the UK for tax purposes?”

2. “Have you been resident in the UK for tax purposes from the date you left office as PM until now?”

The company number for Windrush Ventures Ltd is 6397276 and anyone can view the accounts by going to the Companies House site here

Adrian Huston is a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080

Rihanna the farmer and the tax-man

Rihanna, the farmer and the tax-man.

We all know by now that Bangor farmer Alderman Alan Graham told Rihanna to cover up when filming in his fields.

Who’d have thought that my online comment about taxing the farmer could have upset so many Daily Mail readers. It is currently voted 3rd most unpopular comment out of about 900.

I thought Daily Mail readers believed in paying their way. I’m sure that includes paying tax on all your income!

By the way here’s what I said:

“This farmer will have been offered a tidy sum for the use of his land – hundreds of pounds. He agreed and then didn’t like what they did. The only reason he hasn’t been paid is such things take a little time. I hope he remembers to put it on his Tax Return! (And no, Alderman Graham, donating your fee to charity or Church does not make it tax-free.)”

Adrian Huston

Belfast