Jersey: Dealing With HMRC Investigations Into Offshore Accounts - February 2012

Last Updated: 9 February 2012
Article by David Dorgan

In May 2006 H.M. Revenue & Customs ("HMRC") won a landmark victory with significant ramifications. The Special Commissioners ruled in favour of HMRC against Barclays Bank plc, which forced the bank to release to HMRC certain personal details of its clients who hold offshore accounts so HMRC could investigate any irregularities relating to unpaid tax on interest earned. It was assumed that this was merely the 'tip of the iceberg' and that HMRC were after a far bigger prize beyond unpaid interest earned in offshore accounts.

Then, as from 2009, the Finance Act 2008 authorised HMRC to issue information notices requiring UK financial institutions to provide HMRC with certain information and documentation, within their power or possession, relating to account holders who have an address within the United Kingdom and who hold a non-United Kingdom bank account. A non-United Kingdom bank account is an account where the money or assets relevant to the account are held outside of England, Wales, Scotland and Northern Ireland.

On 13 August 2009 HMRC obtained approval from the First-tier Tribunal to issue information notices to over 300 UK financial institutions requiring them to produce reasonably required information about account holders with offshore accounts to check the UK tax position of a class of persons not known to HMRC.

UK Financial Institutions

A UK financial institution has very limited rights upon receiving an information notice from HMRC. The Finance Act 2009 contains specific provisions preventing appeals against the First-tier Tribunal's decision to approve the issuance of an information notice. However, it may be possible to appeal on the basis that it would be unduly onerous to comply with the information notice. If a UK financial institution will have significant difficulties in complying with the terms of the information notice within the specified and required time period, then it should consider approaching HMRC as soon as possible for an extension and/or making an appeal within 30 days of receipt of the information notice.

The Finance Act 2009 contains certain exemptions for legally privileged materials and auditors' and tax advisers' papers. However, these are unlikely to be relevant to the factual information requested by HMRC. That said, it is doubtful that HMRC can demand the production of documents not in the UK financial institution's possession or power.

UK Financial Institutions: Information held offshore

If a UK financial institution receives a notice from HMRC in respect of an account held by its subsidiary offshore, such as in the Channel Islands, then the information may not be within the parent's possession or power. This will depend upon the position under local law and its response to HMRC depends on the particular factual position applying to that financial institution. However, the UK financial institution should always keep in mind its duty of confidentiality owed to its customers and any data protection issues under local laws. The financial institutional should consider the following points as a minimum:

  • The legal structure of its Channel Island business;
  • The local rules as to confidentiality, how these apply in each case and how they are affected by any contractual arrangements made between the Channel Island entity and its customers;
  • The extent to which the onshore financial institution has documents or information relating to customers of the subsidiary or branch available to it without the need to access the written records or computer network (and servers) which support the offshore business;
  • What arrangements need to be made to secure compliance with the Data Protection (Bailiwick of Guernsey) Law, 2001 and the Data Protection (Jersey) Law, 2005 when dealing with Channel Island customer information;
  • Whether, if an onshore institution already has de facto access to subsidiary or branch customer information, such information was delivered in breach of any duty of confidentiality and, if so, what might be done about that; and
  • How any information which is available should best be collated.

Tax Information Exchange Arrangements ("TIEAs")

A UK financial institution must also consider the existence of any TIEA in the jurisdiction it has an offshore subsidiary. The TIEA was developed by the OECD Global Forum Working Group on Effective Exchange of Information to promote international cooperation in tax matters to establish effective exchange of information.

Presently the Channel Islands have 52 TIEAs in place (Jersey has 24 and Guernsey has 28, with more TIEAs being negotiated) with countries which include with the United Kingdom, China and the United States of America. The TIEA with the United Kingdom agrees that the authorities of Jersey and Guernsey will ensure that they have authority to obtain and provide, upon request, information:

  1. held by banks, other financial institutions, and any person, including nominees and trustees, acting in an agency or fiduciary capacity; and
  2. regarding the ownership of companies, partnerships, collective investment schemes, trusts, foundations and other persons, including information on all persons in an ownership chain;

provided that, the requesting authority may only make a request for such information when it is unable to obtain it by other means. Such information will be exchanged without regard to whether the requesting authority needs the information for its own tax purposes or that the conduct being investigated would constitute a crime under the laws of the requesting authority's territory.

The Channel Islands have, for many years, taken a proactive and responsible approach to international co-operation in tax matters and are dedicated to being transparent, highly regulated and providing quality financial services. Therefore if HMRC cannot obtain the required information by serving an information notice upon a subsidiary of a UK financial institution based in the Channel Islands, then it is entirely possible HMRC may, with the assistance of the British Government, request the authorities of Jersey and Guernsey to provide such information pursuant to the TIEA.

UK Taxpayers with Offshore Accounts


The UK signed a TIEA with Liechtenstein on 11 August 2009 enabling the UK and Liechtenstein to exchange information to ensure that the correct amount of tax is paid in each country.

However, on 1 September 2009 HMRC introduced the Liechtenstein Disclosure Facility ('LDF') giving UK taxpayers, including individuals, companies, partnerships and trusts, the opportunity to voluntarily disclose information in exchange for a reduced penalty of 10%. A key benefit of the LDF is that HMRC has agreed to only recover unpaid tax from 6 April 1999 onwards whereas, usually, HMRC has the power to collect unpaid taxes for a 20 year period. The LDF will expire on 31 March 2015 and any UK taxpayer failing to make full disclosure by then may find their accounts in Liechtenstein closed down.

However, to demonstrate how serious HMRC is about protecting the UK Exchequer from taxpayers seeking to evade taxes, it was reported that HMRC paid an informant £100,000 for data regarding UK taxpayers who have bank accounts in Liechtenstein. No doubt HMRC will also use the TIEA with Liechtenstein to obtain such information and therefore HMRC may well have identified many UK taxpayers with accounts in Liechtenstein who have not taken advantage of the LDF before its expiry in 2015. Those taxpayers may face investigations from April 2015 onwards.


On 25 October 2010 the UK and Switzerland agreed inter alia that: (1) existing untaxed assets should be regularised; (2) future investment income (interest, dividend, capital gains or other investment income) should be covered by a withholding tax; and (3) tax will be transferred to the UK on a no-name basis. Furthermore, Switzerland agreed to provide extended administrative assistance to ensure that UK taxpayers are not circumventing the withholding tax.

In August 2011, the UK/Switzerland Double Taxation Convention was revealed and in October 2011 HMRC announced it would commence writing to UK residents and organisations holding Swiss bank accounts with HSBC in Geneva who HMRC believes have not reported all their income and gains. HMRC received the information of UK taxpayers having HSBC Swiss accounts from the French tax authorities pursuant to a TIEA. The letters issued by HMRC warn that those account holders who do not come forward will be the subject of an investigation where penalties of up to 200% could be levied. HMRC has warned that account holders will only be given a maximum of 30 days to disclose and that this timeframe is not negotiable, not leaving much time for account holders to take advice or restructure their affairs.

This is clearly an aggressive approach from HMRC making it apparent, certainly to HSBC Geneva account holders, that HMRC is very serious and proactive about protecting the UK Exchequer.

HMRC Offshore Co-ordination Unit

Recently HMRC has established the new "Offshore Co-ordination Unit" staffed by twenty five inspectors and numerous HMRC support staff. The UK government made £917 million available to HMRC to assist in closing the tax gap and targeting offshore accounts in particular. The new Offshore Co-ordination Unit, and HMRC's attitude to Swiss account holders, is a clear example of HMRC's determination to recover evaded taxes.

Penalties for Non-Compliance

It is worth noting that HMRC can impose a fixed penalty fine of £300 for failing to provide the information or documents required by an information notice. Thereafter, HMRC can also impose a further penalty of £60 which arises for each and every day the breach is ongoing.

For example, Mr Tom Wan was fined a total of £1340 pursuant to daily fines of £10 imposed by HMRC for alleged failure to comply with the requirements of an information notice dated 9 September 2009. Mr Wan appealed the daily penalties to the First-tier Tribunal on 5 July 2011 arguing that he had supplied all the necessary information, but the First-tier Tribunal rejected this contention dismissing Mr Wan's appeal finding that he had failed to provide statements for three bank accounts.

HMRC also has available the option of bringing criminal proceedings if documents are being concealed or destroyed following notice that the documents are likely to be the subject to an information notice.

Furthermore, as from 1 April 2010, HMRC is able to 'name and shame' serious tax evaders on HMRC's website as an additional deterrent to reduce tax evasion.


It is a reasonable assumption that the economic turmoil and deficit difficulties facing the UK will invigor HMRC to investigate offshore accounts.

UK taxpayers are perfectly entitled to operate bank and investment accounts in offshore jurisdictions. However, those UK taxpayers not fully complying with their obligations to the UK Exchequer may find HMRC knocking on their door. It would be sensible for those taxpayers to take the initiative and seek professional advice before HMRC writes to them. The Channel Islands can assist those taxpayers with the proper structuring of their wealth and/or business interests for their present and future benefit without fearing "the knock" from HMRC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.