Amnesty launched for offshore dodgers

Amnesty launched for offshore dodgers

All of us have the right to keep our money in a bank anywhere from the Isle of Man to the Maldives. But failure to disclose interest received and pay tax due is evasion - and that's illegal.

This week HM Revenue and Customs launched an amnesty - officially the "offshore disclosure facility". Instead of penalties of up to 100% of the tax owed, anyone making a full disclosure by June 22 will pay just 10%. And if the tax owed is less than £2,500, it will waive penalties, although all taxpayers using this "facility" will have to pay interest due on back tax.

One estimate suggests £200bn is hidden away in offshore banks, gaining at least £8bn a year in interest and a potential £3bn a year tax evasion loss. An amnesty in Ireland five years ago brought in £580m in unpaid taxes.

Offshore tax cheats once relied on account details being protected by confidentiality. But a two-pronged attack has uncovered huge amounts of information on tax dodgers.

In 2002, the then Inland Revenue set up the Offshore Fraud Project Group on Merseyside, conveniently close to the Isle of Man - seen as the tax haven of choice for UK evaders with less genuine international business than tax-free Jersey and Guernsey.

But the real breakthrough came with the EU savings directive in July 2005.....continued below

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In April 2006, however, the Revenue forced Barclays to disclose details of customers using UK legislation.

The other big banks - Halifax Bank of Scotland, HSBC, Lloyds TSB and NatWest/Royal Bank of Scotland - were also hit by disclosure orders after they failed to disgorge information voluntarily. Smaller banks and building societies have now fallen into line.

But this is not a general tax cheat amnesty. Chris Oates at accountants Ernst & Young warns: "While this emphasises HMRC's active approach in tackling offshore tax evasion, crucially, there is no immunity from prosecution. Therefore any disclosure can probably be used in evidence. Undoubtedly, the incentive to disclose is the fact HMRC is holding substantial information on individual offshore accounts."

Francesca Lagerberg at the Institute of Chartered Accountants says: "This is a reduced penalty period, not an amnesty. And you'll have to explain where the money comes from."

Noshir Avari, a former tax inspector who runs specialist tax investigation consultancy Avari & Associates, agrees that some taxpayers will have a lot of explaining to do. He says HMRC wants disclosure from the less serious cases so it can concentrate its growing firepower on big offenders.

"This is an offer that only a fool would turn down, but it is not as clear cut as it might seem. By disclosing an offshore account, you also reveal a sum of money. The Revenue will want to know where that comes from. If you can't or won't say, you could be in serious trouble."