Accountants warn that anyone caught using an offshore bank to evade tax may be prosecuted and fined.
Offshore account holders are therefore being urged to own up voluntarily about undeclared funds. Interest on money in offshore accounts is paid gross — without deducting tax — but taxpayers resident in the UK must pay income tax through their self-assessment forms. Some people are legitimately exempt from paying UK tax on an offshore account if they are resident but not domiciled here.
David Rothenberg at accountants Blick Rothenberg said: “If you have unpaid tax for the 2003-4 and 2004-5 tax years you can declare it when you hand in your 2004-5 tax return, due by the end of this month.
“If you have undeclared income from previous years or have paid earnings into your offshore account without paying tax, you should seek advice and own up to the Revenue.”
Francesca Lagerberg at accountants Smith & Williamson expects the taxman to seek permission to investigate other banks and credit-card companies.
Advertisement
“This shows that Revenue & Customs is ramping up its activity against offshore tax evasion,” she said. “But if you have been declaring your income you have nothing to worry about.”
Revenue & Customs cannot automatically get access to information about bank accounts, but can be given the go-ahead by a special commissioner of the Revenue.
In a test case, commissioner John Avery Jones agreed that there were reasonable grounds to suspect that many customers of the unnamed company were failing to declare income from offshore accounts.
It is expected the firm will be forced to hand over details about customers’ credit-card transactions, which will be used to trace money back to offshore banks. Inspectors will then check whether customers have reported any interest earned. Revenue & Customs expects this first inquiry to yield about £350m in extra tax revenues.
The Revenue has already sent letters to hundreds of savers with offshore bank accounts.
Advertisement
The letters, which have been criticised as “intimidating”, say: “HM Revenue & Customs holds information which shows that you have operated a bank account outside the UK ... Experience has shown that such accounts are often associated with tax evasion ... In the most serious cases we consider criminal prosecution.”
If you receive such a letter, you have 30 days to respond.
TIPS FOR OFFSHORE ACCOUNT HOLDERS