Offshore investors to be offered another amnesty

HMRC continues to chase undeclared funds, but how many will own up when they could still face prosecution? Julian Knight reports

Tens of thousands of people with money in offshore accounts are to be offered a fresh partial amnesty provided they own up to the tax they owe. As early as the new year, HM Revenue & Customs (HMRC) will officially request that as many as 150 banks and other financial institutions pass them details of customers' offshore accounts.

"We have had a meeting with 150 of these [banks] and will be serving information notices to bring more info into our net," said HMRC's director-general, Dave Harnett, speaking exclusively to The Independent on Sunday.

In the light of earlier legal rulings, these banks are unlikely to have any option but to comply with HMRC's request. Armed with this data, HMRC will then offer the taxpayers a "disclosure arrangement", in other words a partial amnesty. Mr Harnett says the terms will be "similar" to those offered in June to 100,000 people with accounts held in offshore branches of seven of the UK's biggest high street banks, often in tax havens such as Jersey and Guernsey. Under that deal, account holders who owned up and paid their back taxes, plus interest, had their fines capped at 10 per cent.

Just over 64,000 taxpayers took HMRC up on the partial amnesty by the 22 June deadline and disclosed that they had money offshore on which there could be tax to pay. These people now have until 26 November to pay what they owe, plus the 10 per cent fine, or the deal will, in the words of an HMRC spokesman, be "scrubbed".

Mr Harnett revealed that around 20,000 taxpayers have so far paid in full and, as a result, HMRC has collected £120m. But this is far short of the HMRC's special commissioner's estimate of £2bn of unpaid tax held in offshore accounts.

"This is a drop in the ocean compared to what HMRC are due," says Adrian Huston, a former inspector of taxes and an accountant, adding that the terms of the HMRC offer were too strict: "An earlier amnesty in the Irish republic brought in hundreds of millions from a much smaller economy. The key was that people were offered an upfront immunity from prosecution. The HMRC, on the other hand, still retains the right to prosecute, even those who meet all their deadlines."

However, Mr Harnett says the partial amnesty hadn't fallen flat and that he expected a last-minute rush: "I wouldn't want to guess how much we will get in, but if you look at how people responded to the June disclosure deadline, it was very back-end loaded.

"Whenever there have been disclosure arrangements where people have been offered immunity, there has been a good deal of recidivism, and authorities have had to have another amnesty a few years later ... The overarching goal is not to drag this out any longer than is needed."

But does HMRC have enough inspectors to bring those who have ignored its deadlines to book?

Mr Huston thinks not: "The HMRC has for a long time failed to employ enough inspectors. They won't have enough to sift through the information they have to date, never mind anything new."

But while acknowledging there is "a resource issue", Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, says the HMRC will go for soft targets first: "They will go after people who use the self-assessment system – these will be the easiest to trace and bring to book."

He adds: "In an electronic globalised age, the chances of disappearing money offshore and evading tax are increasingly slim. People may have got away with it till now but not in the future."

Some high-profile tax avoiders who failed to heed the June deadline could find themselves in court in a matter of weeks.

"We have been investigating some big cases since June," Mr Harnett says. "For instance, we have identified a company director who since the mid-1980s has been telling us he earns a modest salary when we know he has £1.2m offshore."

Less serious offenders can expect to be hit with fines of between 30 and 100 per cent of the unpaid tax.