Who still has money stashed offshore?
Published 26/11/2009 | 10:04
With just days left to register with HMRC for the tax amnesty (deadline Monday November 30, 2009), today I am giving a few real life case studies to show the sorts of people who have money offshore which is not declared.
By taking advantage of the amnesty you have the chance to tidy matters up with HMRC (HM Revenue & Customs) and pay a low penalty for your tax mistakes. You will probably have the figures accepted without any questioning or challenge thus allowing you to know the matter is closed.
One of the important aspects of the amnesty is that HMRC are only going back as far as April 6, 1988. This means that for lodgements before that date HMRC can’t get the tax for earlier years. This is quite significant since much of the money lying in offshore accounts was put there in the early 1980s when bank mangers positively encouraged such activity.
Thus if you stopped lodging money offshore by March 1988 then HMRC will only be seeking the tax on the income that money has earned. This will dramatically reduce the amount you have to pay.
My explanatory videos about what HMRC calls the New Disclosure Opportunity can be viewed on the HustonTV YouTube channel here . Also on that link you will find the boss of HMRC Dave Hartnett giving the official line about the process – not often a senior civil servant goes on YouTube!
So now down to the case studies. These are all real people, though of course client confidentiality is very important so no names will be given. The reason to give these examples if to show readers that their circumstances may not be that unusual.
Mr A never was self-employed and did not fill in annual Tax Returns. However when he died recently an investment offshore came to light. It turned out that before that investment there was an offshore bank account. As a result of Mr A not having told HMRC while alive, it fell to his personal representatives or executors to tidy things up. Since Mr A died in the past 4-5 years HMRC have a right to their tax, going back to 1988. Unusually there will be no penalty for offences during Mr A’s lifetime – this only happens in deceased cases. HMRC information about deceased people and offshore disclosures can be seen here and scrolling to question 42.
Mrs B was named on an account set up by her father-in-law. Not only has the father-in-law died long ago, but so has Mrs B’s husband, leaving her with the money to sort out. Mrs B must now register under the New Disclosure Opportunity to declare her share of the bank interest earned offshore from 1988 to now.
Mr & Mrs C stopped investing in the Isle of Man over 20 years ago, but the money stayed there, earning interest. They continued to fiddle their taxes, only with the undeclared money staying within the UK, both in a hoard of cash and in things bought with cash. A disclosure under the NDO can sweep up the offshore income (interest) and also any onshore tax which is owed. This is attractive as it allows people to come clean about everything. There must, however, have been some tax lost in respect of something outside the UK in order to use the NDO.
Mr D was aged 80 and long retired, however he remained scared to declare the money stashed offshore many years ago. In the end he owed HMRC £140,000 but was able to sleep in his bed when it was all paid. He could also use what money was left without fear.
Mr E aged 75 salted money away and didn’t pay tax on it before it left our shores. With high interest rates he ended up with £1.5 million offshore – scared to touch it. Much of the original tax evasion was before the amnesty start date which saved him money. In the end HMRC got a tidy £500,000. Mr C was then left with a legal £1 million and was able to invest it with UK institutions and make provisions for his family on his eventual death. He no longer had to worry about the problems he would be leaving behind.
In the 2007 amnesty HMRC obtained £400 million from all over the UK. As tax specialists many people sought our help in coming clean about their offshore money. Via our firm those people paid HMRC over £1.6 million – close to 0.5% of the whole UK. The great thing for HMRC was such a lot of money brought in with minimal effort. For those people we helped it cleared their consciences and allowed them free use of the money they had left.
HMRC has said this is the last such amnesty and from December 1, 2009 they will compare their recent offshore information from 300 banks with those people who have still not come forward. Doubtless that exercise will produce juicy tax investigations for the next 5 years.