17 November 2011
- Fines of up to 100% for taxpayers who fail to comply
- Innocent taxpayers may be alarmed
Thousands of UK resident holders of Swiss bank accounts will receive letters from HM Revenue & Customs (HMRC) this week threatening a thorough investigation into their tax affairs according to our research.
Many of the recipients of the letters are completely innocent of any wrongdoing, but may suffer unnecessary worry and expense as a result.
Taxpayers receiving letters will have a short time limit to make a full disclosure of any tax irregularities. The letters suggest that failure to do so could result in a full investigation supported by HMRC’s statutory powers.
Despite threatening a formal investigation, the letters imply that taxpayers are already under investigation! The letters start by saying ‘…we have started an investigation under the terms of a new agreement between the UK and the Swiss Confederation’, but then go on to say ‘If we do not hear from [taxpayers] by then, we may start an investigation into their tax affairs supported by our statutory powers.’
HMRC will be able to collect far more in fines by launching investigations into taxpayers who have not made disclosures either under the UK/Swiss tax deal or the Liechtenstein Disclosure Facility (LDF). The difference could mean that instead of paying fines of 10% of the tax due, some taxpayers may have to pay fines of up to 100%.
Disclosure under the UK/ Swiss agreement will be based upon a Swiss bank account open on 31 December 2010 which remain open on 31 May 2013, so this route has distinct limitations.
Our reseach says that taxpayers who have received letters from HMRC and have no additional tax to pay include non-domiciled taxpayers who have elected to pay the £30,000 annual levy to be taxed on the remittance basis.
Taxpayers who do not receive one of these letters but who have undisclosed liabilities relating to offshore accounts should consider this a ‘warning shot’ and seriously consider making a full disclosure immediately.
Roy Maugham, Tax Partner at our London office, comments: “These letters are a warning shot. Taxpayers who fail to respond can expect the heavy artillery to follow.”
“The noose is tightening. Taxpayers with undisclosed liabilities arising from funds offshore should seriously consider making a voluntary disclosure as a matter of urgency. HMRC will catch up with them sooner rather than later. When it does, the financial repercussions could be extremely serious and there is a growing risk of criminal prosecution.”
“A lot of our clients who have received these letters are completely in the clear. These letters are quite intimidating in tone, and they could cause a lot of sleepless nights, as well as unnecessary costs, for taxpayers who are completely innocent.”
“The difference between a formal investigation and a voluntary disclosure is critical. Taxpayers who come forward and are completely open with HMRC can expect more lenient treatment. Anyone with undeclared liabilities who ignores these letters will get much tougher fines. Instead of 10% fines, they could face fines of up to 100%”
He adds: “A lot of taxpayers with Swiss bank accounts will be better off using the Liechtenstein Disclosure Facility.”
New penalties for offshore tax evasion came into force on 6 April 2011. From the 2011/12 tax year onwards, taxpayers could face fines of up to 200% depending upon the location of the funds.
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