As Tax Investigation specialists we understand how difficult it is for clients to admit to HMRC that they have filed incorrect returns. They are understandably concerned that HMRC will seek to prosecute them or at the very least conduct an intrusive and lengthy investigation. They are also worried by the prospect of sizeable financial penalties and open ended professional fees.
We cannot pretend that making a disclosure to HMRC is a pleasurable experience and we cannot eliminate all risk however we can confirm:
i) That HMRC does not usually prosecute in cases where a complete disclosure has been made on a voluntary basis.
ii) That the majority of voluntary disclosures handled by us are concluded within 6 months of initial approach.
iii) That most of our tax investigation cases are settled with penalties of less than 20% of the tax arising from the omitted income and many at l0% or less.
iv) Despite being industry specialists our fee rates are typically less than 50% of those charged by the Big 4 firms. We are also able to consider fixed fees in appropriate cases so that you know the costs from the outset.
We have provided below some notes that explain the lengths that HMRC has taken to tackle evasion through the use of offshore accounts.
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HMRC and many other foreign tax authorities have worked hard over the last few years to increase co-operation in an attempt to stamp out tax evasion. In 2007 they obtained bank account info from the five high street banks.
In 2009 HMRC won the right to demand compulsory disclosure notices from a further 308 financial institutions. These notices will force the provision of information identifying UK resident customers who have offshore accounts. It is thought that HMRC will gain access to details of up to 500,000 overseas bank accounts.
HMRC's interest will not be limited to accounts handled by these institutions as they will also be demanding details of payments and transfers on behalf of customers to other overseas bank accounts, including accounts held with other organisations.
HMRC has also received information as a result of the European Union Savings Directive (EUSD) which (confusingly) not only applies to EU countries but also to a number of affiliated territories such as Andorra, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Jersey, Isle of Man, Liechtenstein, Monaco, Switzerland and Turks and Caicos Islands. The EUSD requires territories to automatically share bank account details with the tax authority of the country in which the account holder is resident although some are subject to transitional rules which defer the provision of information.
Should HMRC discover the existence of an offshore account or activity they can use recently negotiated Tax Information Exchange Agreements to obtain further information. There are now agreements with 21 territories which include Bermuda, British Virgin Islands, Guernsey, Isle of Man, Gibraltar, Cayman Islands and Jersey to obtain detailed information from the authorities in these territories.
For a full list of the agreements that have been signed please visit www.hmrc.gov.uk/international/tiea_signed.htm (external link)
HMRC has received information about UK resident holders of bank accounts with HSBC in Switzerland following the passing of bank data to the authorities.
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HMRC will use this information to identify people for in-depth civil or criminal investigations. In civil cases HMRC has stated that where people have chosen not to come forward they will seek much higher penalties. HMRC can currently charge penalties of up to 100% of the tax avoided (200% for future years). Also, HMRC will potentially 'name and shame' those that are found to have omitted income that gives rise to tax of more than £25,000.
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We are able to approach HMRC on your behalf with a view to smoothing the process and obtaining much reduced penalties. Because we understand how HMRC operates we know who to contact and how to minimise the chances of an in depth enquiry.
About Baker Tilly
We are a leading mid-tier accountancy practice in the UK with 28 offices located throughout the UK. We employ tax investigation specialists, many held senior positions in HMRC before joining us. Despite our expertise and size we are small enough to be able to set our fee rates at realistic and competitive levels.
Call 0800 032 8374 now and receive free and confidential advice.