tax & jurisdiction | confusion greets revenue"s plans to target investors via banks
The Inland Revenue will at last clarify how it plans to tackle tax evasion on offshore accounts in a conference initiated by the Jersey Taxation Society.
On receiving £66m from the Chancellor in the last budget, the Inland Revenue has been set the task of recouping £1.6bn in unpaid taxes over the next three years.
Although the Revenue has confirmed the establishment of a taskforce known as the Financial Institutions Project Team (FIPT), it has, to date, repeatedly declined to reveal how investigations will proceed, leaving offshore centres and investors in a quandary.
Recent press reports have suggested the Revenue will be targeting investors via their banks - a tactic it has employed before. In 2002, Bank of Ireland handed over details of a large number of account holders to the Revenue.
However, the news has baffled Britain"s offshore centres given that there are clear client confidentiality issues at stake. Speaking on behalf of Jersey"s financial institutions, Phil Austin, chief executive of Jersey Finance, said: "My understanding is that the Revenue will target clients rather than banks. It is only entitled to ask us for information in circumstances where there is client authorisation. The only alternative is if they produce an order from the courts.” He added: "When I last spoke to our banks none had been approached."
John Riva, president of the Jersey Taxation Society understands that the FIPT will seek to identify who is moving money offshore and the mechanisms involved, focusing on banks, trust and asset management companies.
In particular, it is thought to be looking at reporting obligations for offshore trusts, following the success of its mission to gather information from Bank of Ireland. But Riva claimed not all institutions will take the same view. "Just because Bank of Ireland has done this, it does not mean others will. I would say the door for this sort of action is ajar rather than fully open," he said.
He added that the Revenue"s target of £1.6bn was also "way too high" because there are plenty of legitimate reasons why investors use offshore accounts. "Our financial model is not based on non-disclosure and this is what we will be telling the Revenue at the conference."
The FIPT will be headed up by Tony Dickinson, a former group leader on the Avoidance Group at the Revenue"s Special Compliance Office in Liverpool. He will be supported by a team of approximately 20 investigators.
The Revenue will also be turning to professional advisers as part of its crackdown on tax evasion. As of January, any arrangements made for a client to evade tax will be deemed a criminal offence under the Proceeds of Crime Act 2002 - a crime that will carry a maximum sentence of 14 years in prison plus a fine. Likewise, advisers that do not report any suspicion of tax evasion to the Inland Revenue could be liable to five years behind bars, plus a fine. A spokesperson for the Revenue said: "The new offences demonstrate the hard line being taken by Government against those who commit and enable tax evasion."
l The Jersey Taxation Society conference will take place at the Grand Hotel in Jersey on 4 December at 2pm.
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