It seems that barely a week goes by without something in the press relating to offshore bank accounts and tax. Now we hear that WikiLeaks has been handed two CDs containing details about thousands of people who have used offshore accounts of a Swiss bank. Tax evasion may be automatically assumed by some, and it seems that WikiLeaks will take on HMRC’s new ’naming and shaming’ role without the standard of proof required by FA 2009.
There is nothing illegal about having an account with Swiss banks: they have thousands of perfectly legitimate clients who fully declare their income in the UK but value the privacy that goes with such an account. Their personal financial affairs, to the extent that they are not relevant for UK tax, are none of HMRC’s – or any one else’s – business. Many account holders will be non-UK domiciled and will have carefully planned their affairs so that taxable remittances have not been made.
There will, no doubt, be screaming press headlines suggesting that all such account holders are tax evaders and this attitude may also have taken hold in HMRC. Towards the end of 2010, it started issuing Code 9 enquiry letters to Swiss bank account holders following an earlier data theft. The stolen data was not comprehensive and some of the Code 9 letters are known to have been sent to non-UK domiciled individuals apparently with no case to answer. Clearly, however, they cannot be ignored.
Where there are irregularities, those account holders need to come forward immediately and make a voluntary disclosure to HMRC. The most appropriate route may be to use the beneficial terms of the Liechtenstein Disclosure Facility (LDF) – there is no need to have a current connection to Liechtenstein. The alternative, sitting back and waiting for the inevitable Code of Practice 9 letter, would then preclude the individual from using the LDF and will usually result in a far more intrusive investigation, with far more tax, interest, penalties and professional costs to pay.
Whatever the merits of using stolen data, the fact is that these details are out there and will become known to HMRC: its potential negotiations with the Swiss authorities may flush out more. Add this to the data HMRC has amassed from information notices issued to more than 300 financial institutions in 2009 and its ring-fenced £900m budget to tackle avoidance and evasion over then next few years – part of which will fund a dedicated team investigating offshore matters – and you have a high probability that it will track down those using offshore accounts for tax evasion. So a full voluntary disclosure, either under the LDF or another route if more appropriate, is always the best answer where there have been irregularities.
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