HM Revenue and Customs (HMRC) are ready to pounce on offshore tax-dodgers following the expiry, on 22 June, of their amnesty for people who have undeclared bank accounts outside the UK to make disclosure of them.
HMRC have announced that they will proceed immediately to send out enquiry letters where they are aware of undeclared accounts belonging to taxpayers who have not taken advantage of the amnesty.
For those who have made a voluntary disclosure, HMRC’s amnesty allows the back tax to be paid with interest plus a ten per cent penalty. As penalties for evasion of tax can amount to 100 per cent of the underpaid tax, the terms of the amnesty are generous. This makes it rather surprising that HMRC report that take up of the amnesty offer has been lower than expected, with over 40,000 people with income-bearing offshore accounts failing to declare them.
Recently, HMRC were given the right to obtain details of those who hold offshore accounts with the major High Street banks and this information is being collated by a recently-created civil investigations unit, set up to collect as much as possible of the several billion pounds of unpaid tax thought to be due on money currently held in offshore accounts. More recently still, HMRC have announced that they intend to extend their examination of offshore accounts to include all of the 550 banks which have a physical presence in the UK.
If you have a bank account outside the UK which earns interest, you will normally be liable to UK tax on the interest received, although you will also normally be able to claim a credit for foreign tax you have paid.
If an enquiry is started, HMRC are likely to look closely at the sources of all lodgments into foreign accounts - and they are expecting to uncover a great deal of undeclared income by so doing.
The taxation of foreign income is a complex area. If you have income from abroad, take professional advice on dealing with your tax affairs. If you are notified that you are the subject of an HMRC investigation, take professional advice immediately