I have been reading the opinion of the Special Commissioner who heard the applications from the Revenue to obtain information from four UK high street banks with regard top accounts they hold offshore (mainly it is believed in the Channel Islands) on behalf of UK resident domiciled people who would have liability to pay tax in full on any income arising on those accounts. Reports suggest that the banks in question are Lloyds TSB, HSBC, HBOS and RBS.
The reports have headlined the big numbers - that up to £275 million of tax is expected to be raised, and that about 100,000 accounts are expected to be disclosed. I'm interested in other dimensions though. So much that I think it simply worth reproducing the finding with regard to one bank, in part. I stress, I have no idea which bank this is:
(2) The Revenue are currently investigating the use of offshore accounts by UK residents, which they consider presents a significant risk to the proper collection of UK tax.
(3) The Revenue are aware from information obtained from a source (the identity of which was given to me) unconnected to the Financial Institution, relating to debit cards of a number of customers of the Financial Institution with offshore accounts of whom 25% have completed the foreign income pages in their tax returns.
(4) Out of the names identified by this source a sample, which is intended to be representative, has been chosen of 461 cases (not only customers of the Financial Institution) out of circa 11,000 taxpayers who have made self-assessment returns, are UK resident and domiciled, and have not declared any foreign income. As part of a trial agreed with some of the accountancy bodies, letters based on one of four types of standard letter were sent to them in July 2005. Of these 461 cases, 252 enquiries have been opened, and in 113 cases (of which 9 are being dealt with by Special Civil Investigations, which deals with larger cases) further tax liability has arisen or can be estimated. Five further cases have been settled by a minor query approach. This makes a total of 118 cases (26% of the total sample of 461) with an expected yield (references herein to yield include interest and penalties) of £1.am (an average of £16,100 per case), and many payments on account have been made. If granted, these Notices will also provide further information about transactions entered into by such people. The remaining 204 cases in the sample have been cleared with no tax liability.
(5) I was given full details of Special Civil Investigations and local tax office investigations of 8 cases relating to customers of the Financial Institution involving offshore accounts. The total yield on the 5 settled cases was £1,559,444, an average of £194,930 per case with a further predicted yield of £2,500,000 in respect of the 3 working investigations. In all cases there was both undeclared offshore bank interest and undeclared trading profits. The Inspector accepts that these are unrepresentative and the yield from them is not included in his estimate of the yield if consent to this Notice is granted. However, they demonstrate the likely connection between undeclared foreign bank interest and other undeclared profits.
I admit that reports like this prove what I always suspect: that the stories put out by the Crown Dependencies that they now only attract 'clean activities' are messages of hope, written without any enquiry being made as to the reality of the situation. As for the banks involved: each should be ashamed of two things. The first is that someone somewhere must have had suspicion about these accounts and yet the institutions in question did nothing about them. Second, I think they should be ashamed of the defences put forward for not disclosing. I might come to these later, but what is clear is that all of them acted in complete denial of anything that I could in any relate to corporate responsibility.