HM Revenue and Customs is this week targeting some 5,000 offshore bank account holders who did not supply a declaration under last year's Offshore Disclosure Facility, which ran out in November 2007.
According to accountancy firm PKF, this move turns one of the central tenets of the English legal system on its head by presuming that taxpayers are guilty and demanding proof of innocence.
John Cassidy, tax investigations partner at PKF, said: “HMRC is demanding confirmation and an explanation as to why tax is not due on funds about which it knows little. In many cases, HMRC only knows that someone has an offshore bank account and the funds it contains at a few specific dates. It has little idea how much interest was earned on the deposits, where the money came from or the key question of whether there is an undeclared UK tax liability at all.”
He added that legally, to issue an assessment for unpaid tax, HMRC must have made a ‘discovery’ or, in other words, have actual knowledge that further tax is due, not just that it might be due. Yet the threat is that such assessments will definitely be issued unless informal, voluntary answers are given to the questions raised.
Grant Thornton said any offshore bank account holder who did not respond to the ODF because they felt they had legitimate reasons for holding the account may wish simply to reply to HMRC with a valid reason as to why they have not disclosed the details of their accounts and expect to be bothered no more.
However, tax investigations director Gary Ashford added: “On the other side of the fence, there will be some who knowingly avoided using the offshore disclosure initiative in the hope they would not be caught. Some of these individuals could face penalties of up to 100% of the tax due and in exceptional circumstances, criminal investigation. If anyone in this situation receives a letter, they should comply immediately or face serious consequences.”
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