HMRC Know That Many People Conceal Untaxed Income And Gains Offshore
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Many people believe they can conceal untaxed income and gains from HMRC by placing their assets in other countries. However, in recent years, HMRC has intensified its efforts to counteract this practice. Through agreements with other countries, HMRC is gaining much more information about assets held abroad by UK residents, including bank and investment accounts, properties, and business interests.
Description
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Under the Common Reporting Standard (CRS), financial institutions and financial service companies must provide HMRC with information regarding accounts operated by UK citizens and UK tax residents.
Additionally, HMRC has increased the penalties for cases where offshore accounts have been used to evade tax, imposing penalties ranging from 100% to 200% of the tax due. Furthermore, HMRC can charge an asset-based penalty of 10% of the value of the assets connected to the failure.
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Offshore Bank Accounts
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HMRC gathers information about bank accounts linked to UK addresses from three main sources:
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Exchanges of information with tax authorities in other countries under the CRS;
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“Information notices” issued to banks operating in the UK, compelling them to provide data about bank accounts held in other countries but linked to UK addresses; and
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Purchased data stolen from offshore banks providing information on accounts linked to UK addresses.
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What Are HMRC’s Concerns?
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When HMRC becomes aware of an offshore bank account, they have two primary concerns:
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The source of the funds deposited in the bank account, and whether it has been declared in the UK for tax purposes.
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Whether any UK taxable income or gains have arisen in the bank account (for example, interest or dividends).
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To establish the correct position, HMRC will usually start a tax investigation into the tax affairs of the person operating the account. If they suspect serious tax fraud, HMRC will either obtain evidence for a criminal prosecution or open the case using the procedures set out in Code of Practice 9. For serious cases involving tax avoidance, they will use the procedures in Code of Practice 8. If the case does not seem "serious" or the information held by HMRC is not conclusive, they will open a standard tax investigation into the person’s tax affairs.
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HMRC is also aware that some offshore accounts are held in the names of offshore companies. HMRC is currently obtaining data from offshore jurisdictions regarding these accounts where the beneficial owner is a UK resident.
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How We Can Help
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We will discuss your personal circumstances to determine your tax residence and domicile status. We will also assess whether HMRC is entitled to the information they have requested. If we believe HMRC is not entitled to the requested information, we will inform them accordingly, ensuring that you only provide the legally required documentation. Alternatively, you can provide the information voluntarily, but HMRC should be made aware of the extra cooperation you are offering by submitting these documents.
If you have used an offshore bank account to conceal untaxed income or gains subject to UK taxation, we can manage the tax investigation or voluntary disclosure to HMRC on your behalf.
If you currently or previously operated an offshore bank or investment account and are subject to a tax investigation, or wish to make a voluntary disclosure to HMRC, please contact us for a free, confidential, and no-obligation discussion. We are happy to offer an initial free-of-charge meeting with prospective clients.