The UK government has sent 500 letters to holders of offshore bank accounts reminding them that inco...
The UK government has sent 500 letters to holders of offshore bank accounts reminding them that income from interest needs to be declared by those resident and domiciled in the country, and giving them a month to explain themselves if they are not paying tax.
This may be the first result of the European Union Savings Tax Directive providing governments with information on overseas bank accounts, but HM Revenue and Customs (HMRC) refused to say where they get account details from. "We use multiple sources to obtain information," said the HMRC.
The HMRC said the letters are part of its investigations into tax evasion but denied they mark the opening of an inquiry. But receivers of the letters, which are being sent by HMRC's Offshore Fraud Projects Team, are only being given 30 days in which to reply from the date the letters arrive via first class post. It is unclear what action will be taken against people who do not respond, but accountants believe the HMRC will start an inquiry into anyone who do not provide an explanation. The letters ask the holder to explain why there is no tax liability from their offshore bank account.
Advisers and their clients who receive letters are recommended to check there is no undisclosed non-UK bank income. If there is, the situation should obviously be resolved with HMRC as quickly as possible. If tax returns are not incorrect then clients should respond to that effect, but advisers said there appears to be no legal obligation to provide more information than that.
HMRC said: "More information is becoming available to us through various sources about the holders of such accounts. We would like to give those who use such accounts legitimately and appropriately an opportunity to let us know that, without involving them in a full enquiry when that may not be necessary.
"The object of the exercise is to develop ways of tackling this problem that will minimise the impact on those who have complied with their obligations, while maximising the effectiveness of what we do to those who have not."
Andrew Watt, director of tax investigations at Chiltern, said: "Our information is that these letters are being issued in cases where HMRC feels that tax fraud has taken place, but there is sufficient doubt to stop just short of pursing the taxpayer under the Hansard process (suspected tax fraud).
"This is a very heavy handed approach that is likely to frighten people that receive the letters. Many are unaware of whether their overseas income is taxable in the UK and may not have thought to take professional advice.
"It is important to bear in mind that, according to HMRC, these letters do not constitute opening an enquiry. However, it is unclear what action HMRC would take if a recipient of such a letter was unable to reply within the prescribed 30 days.
"In the first instance, we would advise people to check they have no undisclosed non-UK bank income and if their tax returns are correct, to reply to HMRC to that effect within the deadline. There seems no need to supply extra information."
UK tax authorities has sent letters to holders of offshore bank accounts asking why they are not paying tax.
Receivers of the letters are only given 30 days to reply but the HMRC says it is not the opening of an inquiry.
Clients are advised to check their tax return is correct and if it is then not to supply any extra information to the HMRC.
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Responding to letter from Treasury Committee chair Nicky Morgan