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Offshore investigations set to increase as investors seek UK government savings guarantee

By CreditMan Tuesday, October 21, 2008

Leading business and financial adviser Grant Thornton says HM Revenue & Custom's (HMRC) pursuit of investors using offshore bank accounts for tax purposes will increase as investors move funds back to the UK to guarantee protection on savings up to £50,000.

The news comes in light of HMRC's plans to launch a new tax 'amnesty' for an estimated 70,000 investors believed to be using offshore bank accounts to avoid paying the correct amount of tax.

Gary Ashford, a tax investigations director at Grant Thornton, says, "The current problems in the global savings market may result in many high net worth individuals moving their funds back to the UK in a bid to seek the UK Government's protection. We may well see an increase in retail banks issuing suspicious activity reports as they closely examine the movement of money by investors suspected of failing to comply with current tax legalisation.
A high-profile clampdown on those who did not disclose under last year's Offshore Disclosure Facility (ODF) seems more likely than ever as HMRC seeks to recoup lost tax and balance accounts during a difficult economic period. The Pre-Budget Report may give a clearer indication of the timescale of this clampdown.

"Tax evaders had their chance to come clean and pay reduced penalties of 10% last year during the ODF which ran from 22 June to 26 November 2007 and raised an estimated £400m," Ashford says. "HMRC wrote to 200,000 people on whom they held information about offshore bank accounts. However, about 40,000 of the 60,000 who registered for the amnesty ultimately failed to make a disclosure or pay any tax."

"It is in the best interests of investors with undisclosed offshore assets to seek professional advice and come forward as soon as possible as in some cases individuals could be liable to penalties of up to 100 per cent of the tax due and in exceptional circumstances, criminal investigation. Anyone in this situation should sort this out immediately or be prepared to face serious consequences", Ashford continues.

"Whatever the reasons for not disclosing previously, as time progresses HMRC will harden their approach. HMRC is now stepping up its pursuit and is fully committed to commencing high-profile criminal prosecutions of taxpayers to act as a deterrent. That said, and given that HMRC is continuing to approach additional banks for details on their customers, I believe they will have to run some sort of ODF for those customers who they did not write to."