Tax Research UK

It’s the day when you tell the Revenue you owe tax under their ‘amnesty’, or face the consequences. As the BBC has noted, early this week just 25,000 of the 400,000 suspected cases had confessed.

Now at least 30% of those 400,000 cases will not give rise to liability. I say that because 30% of all people holding accounts in Jersey opted into the EU Savings Directive when they had the chance to do so. That many of the accounts are legitimate, therefore.

That leaves 280,000 or so accounts to investigate. There will be a threshold below which it is not worth investigating. If the accounts are too small I am sure HMRC will ignore them. That will reduce the workload by 75%, I suspect. So, let’s call it about 70,000 accounts to investigate.

On these I seriously hope the Revenue will now be pushing out protective tax assessments, in substantial amounts, and fast. The opening claim should be £100,000 in each case, as a minimum. Of course this may be excessive, but it’s the Revenues job to protect the country from fraud so it has to overstate it’s case initially. And yes this will really frighten people. And so it should. They’ve had time to talk. Now it’s time they were made to act.

But then I think they should be allowed the option of a fast track response. This would be like the amnesty - but the penalty should now be 30%. This would save a lot of time. And the hassle of sending the bailiffs round.

Richard Murphy Amnesty

The FT reports that 10,000 people have now registered under the UK ‘tax amnesty’ and 50,000 have downloaded the forms.

Last week I agreed with KPMG on this issue. Today it’s the turn of PWC, as quoted in the FT:

Tax experts believe that the Revenue is likely to target high- profile cases after the amnesty, although this has been firmly denied by the government. “Those in certain professions such as accountants, solicitors, or MPs are likely to be targeted,” says Stephen Camm at PricewaterhouseCoopers. “The Revenue may well have already selected those people and will be waiting to see whether they disclose their accounts in the next week.”

The Revenue is able to gain information from UK financial institutions with links to offshore accounts. It has already received data on offshore accounts from high street banks such as HSBC and Barclays, and will go beyond these to smaller institutions.

“There are lots of ways in which offshore accounts leave footprints in the UK,” says Camm. “It may take years but the Revenue will uncover them.”

The last point is not completely true yet. But I’m working on it.

Richard Murphy Amnesty, Corruption, Tax Havens

It seems that remarkably few of the 400,000 or so people who it is known have received letters from banks and HM Revenue & Customs about their offshore bank accounts have decided to own up to unpaid tax.

I can only repeat what KPMG have to say on this:

It’s difficult to fathom why so few people have so far come forward to register for the ODF. It may be that there is a ‘herd’ mentality operating here and people are under the impression that there is safety in numbers - if they hide in the crowd HMRC won’t be able to get them - or they believe they are ’small fry’ (even when quite large sums of money are involved) and, as such, HMRC won’t be interested in them. Failing to step forward is a very dangerous gamble. HMRC will work through the list and the vast majority on it can expect to be contacted sooner or later.

On this occassion I’m at one with KPMG.

Please confess by 22 June. You’re doing yourself a favour.

Richard Murphy Amnesty

There’s a new twist in the UK’s so-called ‘tax amnesty’. Those who have had their details disclosed to the Revenue should all have had a letter from their banks. That’s 400,000 or so letters.

At present just 6,600 have told the Revenue they have something to confess as a result. Of course, some won’t need to do so, but to jog the rest along the Revenue are now writing this letter to all those who got letters from their banks - telling them they have until next Friday to own up. It could be a sweaty weekend for some as they decide what to do.

I have some simple advice. Confess. The Revenue know who you are. They’re not going to let you go.

Richard Murphy Amnesty

Dave Hartnett has vowed that all 550 UK banks will be brought within the offshore disclsoure net so that HMRC can discover which UK residents they are servicing from offshore.

Good for HMRC, I say.

Richard Murphy Amnesty

The Telegraph reports this morning that:

Despite the Revenue’s crackdown, investing your money overseas can still pay.

It then goes on to say that the Court ruling that gave the revenue access to details of offshore bank accounts held by UK resident people was made last month. That’s some measure of the accuracy of this piece.

But look at the list of those who they say are promoting offshore:

most high street banks - and some building societies

Alliance & Leicester International

Anglo Irish Bank

SG Hambros

Alan Steel Asset Management

Fidelity, Aberdeen and F&C

Then look at what is said:

Offshore accounts can be useful for those who own property overseas that provides rental income. If this income is kept in an offshore account, you can pay tax in the country of origin rather than in Britain, which may mean a lower tax bill.

That is 100% incorrect for a UK resident and domiciled person. To do as the Telegraph suggests would be tax evasion. And:

Some people might think that a bank account held overseas is beyond the taxman’s grasp, and that omissions and undeclared tax bills are unlikely to be spotted. But this is no longer the case.

I added the emphasis. This has never been the case. All the Telegraph is doing is endorsing past tax evasion. Then look at what the advisers say:

For higher-rate taxpayers in particular, there are potential tax advantages in buying offshore bonds. “We use them every day of every week for our clients,” says Christine Ross of SG Hambros. “They are a great legitimate tax planning tool.”

Ask the question: great for whom? And what are the ethics of this? Then also ask why this can happen:

Alliance & Leicester International has launched a new “eSaver” account that pays 6.15 per cent gross. Although the account requires savers to deposit a minimum of £1,000, the rate is far more attractive than the 5.95 per cent offered by IceSave, which currently tops our best-buy tables [in the UK]. As the account can be opened online, A&L reckons that it is as simple to run as any other online or postal savings account.

How can what was a mutual society now set up offshore to abuse the place in which it is resident and UK society from which it obtains its legitimacy by seeking to move cash offshore? No wonder Dave Hartnett of HMRC is looking to question the practices of these banks. So he should be.

More than that though: we should be questioning why we allow such corruption to exist as it continues to undermine the society in which we all live and from which those with wealth benefit most. I have a word to describe those organisations that partake in these activities. They are rotten, which Wiktionary defines rather well as:

1. Rancid perishable items that have been overridden with bacteria and other infectious agents.
2. Cruel or mean.

These organisations have been overtaken by the infectious agency of greed, leaving them cruel and mean. The result as WordWeb puts it is that they are ‘Damaged by decay; hence unsound and useless’. In other words, in need of replacement. It has to happen.

Richard Murphy Amnesty, Corruption, Tax Havens

This report in the Sunday Times seems a good summary of progress to date on the so-called ‘tax amnesty’. I agree with the sentiment in the report that many of those who will declare will do so at the last minute.

That so many have contacted the Revenue already gives a lie to the fact that no relevant publicity on this has been produced.

Dave Hartnett’s comments about UK banks suggest he shares the Tax Justice Network view that they are ’suppliers of corruption services‘. I welcome that.

Richard Murphy Amnesty, Tax Justice Network, Tax management

Accountancy Age report that Chris Oates of Ernst & Young has said:

The contacts I have across the major accountancy firms indicate that just a few hundred people have actually notified the Revenue that there is tax to pay

Well, that’s hardly surprising. Firstly you’d expect the Big 4 to have their clients under control. Second, if those clients could go offshore you’d have expected the Big 4 to have told them how to do so, and to make sure it was legal. Third, it’s unlikely people who are worried about this are going to form an orderly queue to get help from the Big 4 on this. Price might just be an obstacle. Last, I know KPMG only sent out their brochure on this last week (as I got it). That was half way through the notification period, which was really timely, I thought.

But are people worried? Yes, they are. Google UK tax amnesty and this site comes up first and second. And I’ll tell you, the traffic from that is high. E & Y may not be seeing the evidence, but I am. Which may be a lesson to them that the world is not seen solely from their perspective.

Richard Murphy Amnesty

AccountingWEB has been a having a discussion of tax investigations. This is topical. The UK’s ‘tax amnesty’ will give rise to a fair number, either because the Revenue do not accept voluntary disclosures, or because people who choose not to disclose now will be forced to do so sometime soon.

It seems to me, based on my experience of doing investigation cases and of taking over such cases from other people that:

1) Many accountants do not know enough technically to do these cases
2) Most accountants don’t have the personality to do these cases
3) Most accountants don’t prepare their clients for these cases
4) Many accountants fail to do the legwork required to get a result in these cases
5) As a result they don’t make money from them.

My attitude is simple when doing an investigation. I want the right amount of tax (and interest and penalties) paid and no more. If the client owes, then they should pay. If the Revenue overstate the claim it’s my job to make sure that there is evidence to counter this.

This requires a robust approach with the client and Revenue, but both are based on offering full cooperation. The client has to cooperate with you. You have to cooperate with the revenue, and you expect the same in return.

The part most accountants won’t do is tell their clients what to expect when being investigated. Let’s put this simply. Being investigated by HMRC is for some people the worst experience of their adult lives. They’ve told me that. I believe them. The client has to know that in advance.

To mitigate this the accountant has to do two things. The first is thoroughly appraise the evidence to see where the holes are, what needs to be plugged and how, and all in advance. This takes time and experience. The second is to prepare the client. In my opinion anyone who takes a client into a meeting with the Revenue without having had one or two trial interviews with them in advance where the style of the Inspector’s questioning (which is predictable) has been practised is failing their client. The reason is simple. The accountant needs to know into what embarrassment they are being lead, and it’s much better for this to happen in a trial meeting than in the real thing. Second the client has to be shown how to answer questions. So they must be warned against exaggeration and false claims, or simply hasty answers. That can only happen in advance. And thirdly the accountant may find things out that need to be addressed before getting to see HMRC.

And when that moment arrives the accountant needs to be robust, including objecting to unfair questions when appropriate and being willing to intervene, ask for breaks, instructing the client of their right not to answer until facts have been determined, and so on.

I’ve been told by some accountants that this is not playing by the rules. That’s wrong. These are the rules if the objective is to pay the right tax. Better always for example to have the client say “I don’t know, but we’ll get back to you” than to make rash statements.

The trouble with this is that it takes some force of personality. And unless you’re willing to project that representing clients in this game is likely to be unrewarding in every sense.

Anyone facing an investigation needs to know their accountant will do these things.

There’s one other thing they should expect. A good accountant will expect to be paid upfront. Don’t argue. It’s you whose in trouble, not them.

PS I’m not seeking further investigation work at present.

Richard Murphy Amnesty, Richard Murphy, Tax management

Accountancy Age report that UK accountants PKF have seen evidence that the banks who have made disclosure of offshore bank accounts held by UK resident individuals have also made disclsoure of UK based offshore trusts and companies.

It has been believed until now that the orders issued against the banks excluded this information. However, since money laundering rules used by the banks to identify beneficial ownership will have been organised offshore along lines that do not reflect the difference between the legal structures an individual controls, it seems likely that some disclsoure will have been made on the basis of information held on beneficial ownership as defined for money laundering purposes and not tax purposes. In this case trust and offshore companies may well have been included in the sweep, maybe in error.

I have to say I am delighted by this. This information should be disclosed.

It also means that those with concern on this issue have even more reason to disclose.

And I can confirm that there are many people who have such concerns. This blog comes up first on Google on this issue - partly because of the very large number of people who have been reading what I have to say on the subject. My blog’s traffic has never been so good, and I’ll tel you that some who have called as a result are very worried indeed.

They’re right. They should be worried.

And now I’ll tell you my worry. It’s that the Revenue won’t be able to optimise its collection from this by having insufficient resources to follow all cases up. I’ve never known a worse time for the revenue to be shedding staff. It’s madness. And I hope it’s a policy that’s reversed as soon as possible.

Richard Murphy Amnesty, Guernsey, Ireland, Isle of Man, Jersey, Tax management