Delighted to see that Peter McKay is using our blog as a source of quality information..
The full text of the Daily Mail article can be read online at http://www.dailymail.co.uk/debate/article-2106849/Pay-earn-Not-youre-Leftie.html
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 quiet – here.
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.