UK: HMRC Victory - UK Tax Investigations And Voluntary Disclosure

In a telling triumph for HMRC, it was announced last week that they had obtained orders from the tax tribunal requiring four banks with branches in jurisdictions such as Luxembourg, Austria, Belgium and the Channel Islands to disclose information about offshore accounts held for UK residents. UK customers of the four banks can expect a letter telling them that details of their accounts are due to be disclosed to HMRC.

The Background

This is not the first time HMRC have obtained orders against banks requiring them to reveal depositors' details. It follows similar orders obtained in 2006 and 2007 against five British high street banks, Barclays, Lloyds TSB, HBOS, HSBC, and Royal Bank of Scotland. In addition, rather than the current piecemeal approach, it is understood that HMRC is looking to apply for a general order in respect of every single bank with a presence in the UK to require them to hand over information relating to UK resident customers with offshore accounts. HMRC have also announced a new Offshore Disclosure Facility to start later this year, to be called the 'New Disclosure Opportunity'. This announcement is in addition to HMRC's continuing exercise of obtaining information from banks regarding offshore bank accounts held for UK residents and the introduction of rules requiring the advance disclosure of 'tax avoidance schemes'.

The Effect

It is clear from the initiatives being taken by HMRC that more and better directed resources are being used by HMRC to investigate the tax affairs of HNWIs. Their investigatory powers having been strengthened by the new rules introduced with effect from 1 April 2009, HMRC are now more ready to investigate the tax affairs of HNWIs based in the UK than they have been in the past. With the orders made against the banks, HMRC are principally looking for information about offshore accounts held by UK resident individuals who have hidden taxable income and gains offshore, rather than non-domiciliaries who have legitimately retained offshore income and gains outside the UK. Nevertheless details in relation to both will be given to HMRC.

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