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Taxman targets holders of off-shore accounts

Investments held in undisclosed off-shore accounts are the subject of the latest crackdown by HM Revenue & Customs.

And motor trade accountants suspect dealers could be squarely in HMRC’s sights because of the industry’s recent success in claiming back millions of pounds of VAT overpaid on demonstrators going back 30 years.

One source says: “It would be cynical to say that this gives them an opportunity to claw back those VAT repayments, but if HMRC has spent time gathering information on a dealer and the dealer admits interest on an account, HMRC could still say ‘thank you but we reserve the right to undertake a full investigation’.”

The Offshore Disclosure Facility gives account holders until June 22 to notify HMRC of an intention to disclose untaxed amounts. This allows them to take advantage of its promise to limit penalties to 10% of the tax not paid, on top of the interest owed and outstanding duty.

After that period, the penalties on offshore earnings detected by HMRC’s investigation team will be between 30% and 100%, and could involve criminal proceedings. The investigation could span the past 20 years.

Liz Gallagher, tax director at accountancy firm Trevor Jones, believes that up to 10% of dealers may be concerned by the crackdown and should seek advice.

“HMRC is taking a much more commercial attitude,” she says. “It is looking to focus its activities on getting the maximum return for the least cost of enquiry. We think the kid-glove approach will not continue.”

She adds: “Dealers need to think about this before they make their disclosure so that it is done in a way that retains as much control as possible rather than handing over all control to HMRC.”

“Many dealers have overseas properties, either owned personally or by their company, which may have an associated bank account. Dealers need to address this announcement urgently and seek professional advice.”

HMRC says there is nothing wrong with holding an offshore account as long as due tax is paid. It says: “We want to encourage those with unpaid tax and duties to pay what they owe and we are introducing the Offshore Disclosure Facility to help them get their tax affairs up to date. After June 22, when the notification period ends, we will target holders of offshore bank accounts who do not disclose.”

HMRC has gathered information on offshore accounts from banks and through the European Savings Directive.

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