By Ronnie Ludwig
Accountants Saffery Champness
The crackdown by HM Revenue & Customs (HMRC) on tax evaders has taken another twist.
Ronnie Ludwig, Saffery Champness
A six-figure sum has been paid to an informant in Liechtenstein as a "reward" to him for disclosing the identity of UK individuals who hold bank accounts in the secretive state.
This clearly demonstrates that the HMRC is resorting to ever more drastic measures in the crackdown on off-shore tax evaders.
It sends out a clear signal that the Revenue is prepared to go to almost any lengths to bring such people to book.
Tax inspectors will be salivating over the anticipated tax recovery, rumoured to be £100m in terms of unpaid tax on the interest earned in these accounts.
This however is only the beginning as the penalties alone can be up to 100% of the tax, which could therefore double the benefit to the Exchequer to £200m.
To this sum must be added interest on the unpaid tax, backdated to the date on which the account was opened.
The information supplied to the Revenue is allegedly quite out-of-date; however it is reasonable to assume that most of the information will still be of use to the authorities.
Anybody whose offshore funds are now about to be exposed is now going to be squealing.
Unpaid tax of £100m is the equivalent of £250m of undeclared income, assuming they are higher rate taxpayers.
In my view this must indicate that quite a lot of people are going to be involved.
The interest credited to the bank accounts may only be the tip of the iceberg.
It is entirely possible that the capital sums deposited may themselves be taxable in the UK if these sums have come from undeclared trading or capital gains.
And if that is the case, the tax recovered by the Exchequer could be significantly higher than the figures already reported, all of which represents a pretty good return on the £100,000 "invested" in obtaining the information.
All this may now encourage other informants in other banks and other countries, given the publicity the authorities have given to their actions.
Liechtenstein has been described as an "un-cooperative tax haven"
The Organisation for Economic Co-operation and Development (OECD) lists Liechtenstein as one of only three countries remaining on its blacklist of "un-cooperative tax havens".
The remaining two are Andorra and Monaco.
All other tax havens have signed up to the agreement to co-operate with the authorities in providing information which provides traceability of deposits and assists with the anti-money laundering rules which have been tightened up significantly on a worldwide basis since 9/11.
There is no doubt that HMRC has significantly stepped up its counter evasion work since the introduction of self assessment in 1996/97.
The results so far have been very impressive with recovery of tax lost to the Exchequer each year exceeding £1bn.
These figures are symptomatic of tax evasion on a massive scale and suggest that tax evasion is continuing apparently unabated.
However, they may also reflect the greater resources deployed by HMRC in its drive to counter fraud and evasion and also demonstrate an increase in the investigatory skills of the Revenue staff involved.
The number of criminal proceedings instigated against tax evaders has also shown an increase over the years.
The Revenue's definition of a "serious arrestable offence" which is likely to lead to a jail sentence is one where
- the suspected offender is a professional adviser such as an accountant or a solicitor
- where documents have been forged so as to deceive HM Revenue & Customs
- there has been a conspiracy to defraud the Revenue
- or where the taxpayer, having been challenged, either fails to answer specific questions or fails to make a complete disclosure of irregularities.
Another "serious arrestable offence" is where a Certificate of Disclosure or a Statement of Assets completed in the course of an investigation proves to have been false in a material way, or where a taxpayer is involved in further acts of serious fraud following an earlier similar offence.
Any tax evader who has been operating accounts in Liechtenstein would be well advised to come clean with HMRC and to co-operate fully with it in disclosing information in a formal disclosure report, as this could help to substantially mitigate the penalties involved.
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