22 November 2011

Have you received – or are you about to receive – a letter from HM Revenue and Customs’ Risk and Intelligence Service, Criminal Intelligence Group? Having warned professional advisers that they would be approaching certain of their clients with regard to overseas accounts or investments, HMRC have now sent (or are in the process of sending) what are believed to be several thousand letters to the individuals concerned.

The letters make it clear that, as expected, they have been sent on the basis of information relating to accounts with HSBC and associated banks in Switzerland but they are being used to prompt disclosure of offshore accounts and investments in general. If you receive a letter you are likely to be given five weeks to respond, with the following options open to you:

1. to complete a declaration (“Certificate A”) to the effect that either all offshore income, gains and capital have already been fully disclosed to HMRC or that you have not held any accounts or assets offshore (i.e. HMRC have got their information wrong);
2. to confirm (using “Certificate B”) that you have made or intend to make a full disclosure of all irregularities under the Liechtenstein Disclosure Facility (LDF); or
3. to confirm (using “Certificate C”) that you intend to make a disclosure of all irregularities other than under the LDF.

If HMRC do not receive a completed certificate from you by their deadline, they may start a detailed investigation into your affairs and this could be a criminal investigation.

What should you do?

The priority is to respond to HMRC before their deadline expires.  In many cases this will mean completion of Certificate A, either because income and gains have been fully disclosed (or they do not fall within the UK tax net by virtue of non-domiciled status and the remittance basis) or because you have not held any offshore assets. Before signing, however, steps should be taken to make absolutely sure that appropriate disclosure has been made or that no link with offshore accounts (whether direct or indirect) exists now or has existed in the past. HMRC make it very clear that they may prosecute if false statements are given.

If you do have further liabilities to disclose, you have a relatively short period in which to make an important decision. For many taxpayers – particularly where the amounts involved are substantial – the terms of the LDF will make it the obvious route to go down (indeed, it is interesting that HMRC are actually guiding people in this direction) but it is still advisable to have some calculations drawn up before committing to this. Whether using the LDF or not, you will need expert advice in completing your disclosure and obtaining the best terms with regard to tax, interest and penalties.

We would strongly advise against sticking your head in the sand at this point. Regardless of how accurate HMRC’s information is, if you have received one of these letters and do not respond you are likely to face some serious problems (and both hefty penalties, possible criminal prosecution and/or “naming and shaming” if it does emerge that you have undisclosed liabilities).

If you would like to discuss your circumstances or those of a friend or family member (including a deceased family member) contact Mark Giddens, Chris Mills or Derek Levy of our specialist Tax Investigations, Enquiries and Disclosures Team.