In 2007 and 2009 HMRC had tax amnesties for people wanting to confess to money or assets abroad, where not enough tax had been paid. In 2011 HMRC announced they had 500,000 names of UK people with accounts outside the UK. They are working though the lists targeting people for tax investigations.
So, perhaps you are saying…“But what if I didn’t use the amnesty?”
This is a very interesting question. Some people think that perhaps their offshore bank is not currently supplying their details to HMRC. That could be the case – at the moment. Let’s not forget that the HMRC won the legal argument forcing some banks to hand over details of their UK customers with accounts offshore. They also obtained bank information stolen from a bank and then sold to the tax authorities around Europe!
If HMRC’s lists of information affect you then your tax investigation is looming – and you are too late for the amnesties. Don’t risk waiting for another!
Now then – there will always be a few brave souls who know better. They will continue to cross their fingers and keep their secret from HMRC. What happens in their case?
HMRC is on record as saying that for people who did not avail of the amnesty they will seek a penalty of 30% or more. It can be up to 100% of the undeclared tax – which percentage would depend on how serious the offences were.
Not only will HMRC charge a much higher penalty, they will also embark on a full tax investigation. This is a stressful and expensive process often taking well over a year. Your finances will be examined with a fine-toothed comb. Your lifestyle will be assessed, queried, costed, and inferences made as to how you pay for it. Business records will be examined in detail looking for the sign of the undeclared income. Intelligence from other government departments will be used. For example details noted during investigations of VAT traders or other businesses could be used in looking at you.
Those optimistic souls who ignored the amnesties (or didn’t know about them) won’t be scared by what I am saying – they’ll get away scot-free, won’t they? Well they might. Have they considered the ever-increasing international cooperation between the tax authorities worldwide? Not just in Europe – America, Switzerland, Isle of Man etc. The international tax havens of old are being criticised for harbouring the proceeds of criminal enterprises from all round the World. Hence the old closed doors are starting to open. How long that account will remain secret is anybody’s guess.
Maybe the person with the offshore money is retired, old or both. Much of the money held offshore by UK citizens has been there since the eighties. At that time many people thought, or were told, it was a good idea to put some money in the Isle of Man or Jersey. There was nothing wrong with that so long as the right tax was paid.
Since the eighties people have been scared to touch this money – it has become an albatross round their neck. Being old is no excuse, and does not mean you will escape the HMRC. Death is no excuse either. If you drop dead tomorrow then your executors will be legally obliged to inform HMRC about the offshore money and they will face the same tax investigation which you would have had. HMRC can still come for your tax for a couple more years after your death.
My message is that it’s decision time. How exciting do you want life to be? Do you want the simplicity of paying a bit and sorting it all out by putting your hands up now? Or the excitement of doing nothing, waiting and hoping your secret remains just that?
It’s your call.
If you have undeclared bank accounts or savings overseas then take specialist tax advice and notify HMRC about the irregularities. They can only go back 20 years, so the original source of the funds may escape tax altogether.