The (tax) Inspector Calls…

HMRC have had a good run of late.

300 banks have been ordered by the tax tribunal to disclose details of offshore accounts held by their UK resident clients.

Last year, they obtained a similar ruling against the big 5 high street banks. This latest order is expected to identify smaller numbers of account-holders, but bigger-ticket deposits.

HMRC are offering another chance for the holders of such accounts to come clean and pay a 10% penalty (better than the 100% penalty they could charge!).

Given that HMRC will be looking at your offshore bank statements when they talk to you, I suggest that this will not be a time to call their bluff!

And there’s more! Liechtenstein, of all places, has recently signed a tax information exchange agreement with the UK that includes provisions obliging institutions to close non-compliant accounts.

Having “undisclosed” assets (be that cash or property) offshore is not good tax planning. Even if an individual “gets away with it” during his lifetime, what he is really doing is leaving his heirs a horrible predicament. It’s like an unexploded bomb, waiting to go off.

His executors will have a duty to account fully for all tax that is due on his estate. That will mean including the value of any undisclosed assets in their IHT return, and advising HMRC that the deceased failed to pay tax on foreign income and gains. Interest and penalties will be due – and they will be penal.

As most of the time the executors will be the surviving spouse and/or children, this is one legacy that really should be avoided!

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