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HMRC have begun contacting holders of offshore bank accounts who did not disclose under the offshore disclosure facility offered in 2007.
Depending on the circumstances, this contact may take the form of:
- A letter and an initial form, followed, where appropriate, by the issue of a disclosure form to enable account holders with unpaid tax to bring their tax affairs up to date.
- A formal notice of enquiry.
- The issue of a self-assessment return for the years where none has been submitted.
- In exceptional circumstances that meet the criteria within HMRC's published criminal investigation policy, the undertaking of a criminal investigation.
According to PKF's John Cassidy, HMRC's move turns one of the central tenets of the English legal system on its head by presuming that taxpayers are guilty and demanding proof of innocence.
He said: 'HMRC are demanding confirmation and an explanation as to why tax is not due on funds about which they know little. Legally, to issue an assessment for unpaid tax, HMRC must have made a “discovery” or, in other words, have actual knowledge that further tax is due, not just that it might be due.
'Yet the threat is that such assessments will definitely be issued unless informal, voluntary answers are given to the questions raised.'
Mr Cassidy added that taxpayers 'are under no legal obligation to respond to these letters, but the reality is that anyone who ignores one will ultimately face an assessment seeking to collect the tax assumed to be due, perhaps after a detailed investigation into their tax affairs'.
He said that the 'only sensible option for individuals who have not fully declared their income in the past is to make a full voluntary disclosure to HMRC.
'But anyone contemplating this approach should seek expert advice on how to do it in a way that keeps penalties and risks to a minimum while reducing exposure to further investigation and potential prosecution.'
Grant Thornton's Gary Ashford believes individuals who have knowingly avoided paying tax on their offshore accounts should own up as soon as possible because HMRC are taking co-operation into account when determining any penalties, but he warns that HMRC have said penalties will be no less than 30%.
'Tax evaders had their chance to come clean and pay reduced penalties of 10% last year. Now, HMRC is playing hardball and will be taking no prisoners,' said Mr Ashford.
