November 2012 - Huston and Co

The Daily Telegraph reported on 9 November 2012 that that same week a bank whistleblower had grassed up 4,388 UK people with accounts at HSBC in Jersey.

HMRC has, unusually, confirmed that they have received this information and will be using it to check the tax rules ‘are being respected’. What a lovely phrase!

What have HMRC been given?

Details of over 4,000 people in the UK who had money in HSBC in Jersey, sometimes known as HSBC Expat. This means their name, UK address and the amount in the HSBC account.

The average balance in the accounts disclosed is £337,000.

Whose accounts are these?

The accounts are held by a wide range of people from people who are now retired to senior figures in the City, to criminals of various sizes. They will doubtless be from all parts of the UK.

My own experience as a Tax Inspector, and more recently as a tax consultant, tells me that people in Northern Ireland have a particular attraction to putting their money in Jersey, Guernsey or the Isle of Man.

Should everyone named be scared?

Absolutely not. There is nothing illegal in having money in Jersey or anywhere else offshore. Wat is illegal is not paying the right UK tax. The tradition of banking secrecy surrounding the Channel Islands, Switzerland, Leichtenstein and the Isle of Man has encouraged certain behaviour. This behaviour may, in itself, be illegal.

So who has something to fear?

You should worry if the existence of your money offshore points to some form of illegal activity, including tax evasion. This could mean:

The source of the money invested was not properly declared and taxed, or
The means of obtaining the money invested was itself criminal (drugs, guns, bribery etc), or
The interest earned on the accounts was not declared.

This last point is interesting. We help a lot of people to declare offshore savings and income, sometimes going back many years. In some cases the original source of the money is completely legit. For example the life insurance when your spouse died, or a transfer from a UK savings account. Where people have come unstuck is that once the legal money was offshore they failed to declare the interest it earned. That then becomes illegal tax evasion.

If you have an undeclared offshore account…

Now is the time to confess to HMRC – that is before they come to you. In general you will be given an easier time if you come forward to HMRC to tell them something was wrong with your tax affairs. You will also generally pay a lower penalty – that is what is added to the bill as a percentage of the tax you owe.

Who will help me with this?

I would say a person who declares offshore income without professional help has a fool for a client. This is a case where expert help may save you thousands, and will get the matter closed more quickly. (These are stressful experiences.) You may feel that your regular accountant does not have the practice and expertise in handling such tax investigations. It is for this reason that we are often brought in. When the case is closed we then hand the client back to the regular accountant to continue with routine tax returns and preparing of business accounts.

And if I am on HMRC’s list and do nothing?

Then you simply check the post every morning wondering when HMRC will write to you. Of course they might call in person or phone your accountant.

What HMRC will NOT do is email you about your offshore account. If you get an email from HMRC with an allegation (or good news about a refund) then the email is false and should be reported by forwarding it to phishing@hmrc.gsi.gov.uk

This is just the latest of a range of banking disclosures HMRC has received from whistleblowers – some of whom were paid substantial rewards. (See video here). It seems this is likely to continue and whoever still has offshore money hidden should be afraid.

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. He and his former Tax Inspector wife Felicity Huston specialise in handling tax investigations and disclosures to HMRC.

Adrian also appears on TV radio and in the press commenting on tax matters. See www.YouTube.com/HustonTV

HMRC is paying many thousands of pounds each year to informants who tell them about people who are not declaring all of their income.

Paid informants received £373,780 in 2011/12 which was well up on the previous year’s £309,620.

This information was obtained thanks to the London law firm Reynolds Porter Chamberlain LLP (RPC) who extracted it from HMRC under the Freedom of Information Act.

One of RPC’s partners Adam Craggs said “Typically, an HMRC informant will be an angry spouse during divorce proceedings. For the spouse, threatening to supply information to HMRC provides them with some leverage during divorce settlement negotiations. If the divorce is particularly acrimonious, it is not uncommon for a spouse to turn HMRC informant.”

And how right Mr Craggs is. I know from my time working for the Revenue that one of the most valuable informants is an aggrieved former spouse. I recall specific cases where these spouses came into the tax office to provide very detailed information about the tax-fiddling of their estranged other half. I recall one woman confirming we had all the information we needed, then announcing “Right then, now I’m off to the dole office!” This was because the guy was also fiddling his benefits. A woman scorned…

VIDEO ON THIS: http://youtu.be/ljX2jcf1gVk

In my days in HMRC there was no prospect of paying informants. People told you stuff about suspected tax evasion for a variety of reasons, for example because:

they felt it was the right thing to do
they were jealous that they couldn’t fiddle their taxes
they had been annoyed by your business (perhaps they live nearby)
you did a shoddy job for them for cash
you used to employ them
you and they used to be in a relationship and it’s over

People still call in a local tax office (if they can find one) to share information about tax fiddling, and they also write to HMRC, either giving their name or just dishing the dirt anonymously.

HMRC has set up a Tax Evasion Hotline 0800 788 887 which is staffed 0800hrs to 1800hrs Monday to Friday. This is a confidential number so you can report someone who you suspect is not paying the right amount of tax. By the way, before calling, see how much you can gather to help identify the suspected fraudster, like name, address, vehicle number, mobile number, landline number.

As with any confidential supply of information, HMRC is aware you may have your own motives for making the call. They also know that what you say is suspicious may turn out to be innocent, or may be properly declared. Nevertheless they will consider everything you tell them.

Again from my experience as a Tax Inspector I recall investigating people where we had anonymous information in a letter making various allegations. Many of the allegations turned out to have an acceptable explanation, but there were very useful nuggets which turned a dead-end investigation into a fruitful one.

Nowadays the Tax Evasion Hotline even allows you to inform on someone over the internet – using the form at www.hmrc.gov.uk/tax-evasion/hotline.htm You must supply an email address that HMRC can use to send you an acknowledgement. If you don’t supply that then they will ignore what you are saying. They will not however contact you for further information.

On the other hand if you are happy to be contacted for further clarification, then there is space to leave your fuller contact details. Given how easy it is to set up a gmail account, this effectively means you can give your information pretty-much anonymously.

As for becoming one of these paid informants, I haven’t a clue how you go about it. I know in the past some of the money HMRC paid was to obtain, from former bankers, lists of offshore account-holders from the UK. As for who the recent payments went to, it’s anybody’s guess as HMRC has the whole process cloaked in secrecy. If your information helps bring down a big-scale tax fiddler then there might be scope to get paid for your help. I guess if you wanted to see if a reward might be payable you should make that clear in your first contact with HMRC. Also keep a note of when you phoned and any reference you are given. This would help if in the future you wanted to claim your information helped HMRC bring down Mr Big.

Are there any lessons to learn now you know HMRC pays informants?

Don’t fiddle your taxes.
Don’t let others know you fiddle your taxes – even your spouse or closest friends.
If you are fiddling, then stop.
The longer you are stopped the more chance you might get away with it.

Wonder how much HMRC will pay people for tax evasion intelligence this year?

VIDEO ON THIS: http://youtu.be/ljX2jcf1gVk

HSBC whistleblower names UK accounts in Jersey – is your tax paid?

Earning money as an HMRC informant?