HMRC faces wall of silence from banks over offshore accounts - Accountancy Age.
The Age says:
The banks are revolting. For once, this is not criticism aimed at risky off-balance sheet accounting or bonuses. It actually refers to some of the 308 institutions that advisers say are resisting demands for overseas accounts information from the taxman.
They have support:
“Certainly some parties are looking to take this forward to appeal. This issue is really going to run for some time,” said Sue Holmes, head of tax investigations at Smith & Williamson. “There is a huge amount of confusion among the banks. They want to help HMRC in any way they can, but the banks also have to balance this aim with maintaining client confidentiality.”
I cal that complete bunkum: their choice is comply with the law or help clients who are not complying with the law. Now tell me why they want to appeal in that case?
I note the Age thinks they won't win:
In our view client confidentiality may go out of the window because of the legal muscle contained in the Schedule 36 orders. Whatever the burden on banks, HMRC is looking to nip tax evasion in the bud.
And then they come up against the opposition:
“[Banks] have got vast amounts of money here, or in the Channel Islands or maybe in their home country, on behalf of UK residents,” HMRC’s permanent secretary Dave Hartnett has said.
Not me, I stress: HMRC saying that. And I do not think Hartnett is minded to lose this one.
I hope he doesn't. More than that, I sincerely hope he names, shames and makes life misery in every way poissbkle for thsoe who do not cooperate.
Would that be political? No. It's the rule of law we're talking about here.
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Survey from Labour list here. Has a choice of 25 reforms, one of which is a crackdown on tax havens.
http://www.labourlist.org/was-it-labourlist-wot-won-it-miliband-ed-blogs
This is probably at least 50% storm in a teacup. Commercial agreements usually have one of 3 levels of confidentiality, if any, and almost always nothing to do with tax:
1. Disclosure permitted with prior notice to the other party
2. Disclosure permitted only to governmental authorities or with prior notice to the other party
3. Disclosure permitted only with prior written agreement.
The level of disclosure is more a function of the counterparty and their negotiating strength. Retail customers would get #1, big corporates #3 and the rest would get #2.
If HMRC are wading into banks with all guns blazing then the banks will be caught between a rock and a hard place.
No Alex, as ever you are wrong
They are caught with a requirement that for a change they comply with the law
That has nothing to do with their agreement with the customer: it is their customer who may be abusing
Now why, for once, can’t you uphold the rule of law?
@Richard Murphy
Once again I am not wrong, and have probably been involved in more of these sorts of deals than you have ever read about. I am not saying that the banks don’t have to comply with their legal obligations, merely that to do so may put them in breach of agreements with their clients and may require extensive consents to avoid breaches of those agreements, pretty much what the PKF tax investigations partner said.
If a bank holds say a perfectly innocuous securitisation vehicle in a tax haven with boilerplate confidentiality agreements with a litigious US-based bond or security trustee that don’t allow for any disclosure unless agreed, such agreement not to be withheld when the UK bank can show good cause, the bank is going to have to quibble with every trustee and their lawyers and get their approval, and the trustees may well argue that HMRC do not have good cause to be looking at that vehicle and refuse. Why might they do that? Because at any time that there are distressed debts there may be parties looking to force a default (in this case a default in the securitisation vehicle).
Alex
Sorry: law over-rules
Game over
No argument
Richard
@Richard Murphy
Either you are a deliberate half-wit or just plain stubborn.
Nobody has said that the law doesn’t over-rule contracts, nor that the banks won’t comply, but in order to comply with their contractual obligations, in many cases they probably have to secure the written agreement of their counterparties. If those counterparties think that HMRC is just on a fishing expedition they may refuse. In that case, the banks could well go to the courts arguing that compliance is too onerous.
There are dozens of special purpose companies owned by British banks in offshore jurisdictions which are just conduits for international transactions that are of no interest to the UK tax man, and the judge may well agree.
“They want to help HMRC in any way they can,” – If that were the case surely the banks would simply do as they are now required to do by law?
Alex may have more experience than I on such matters. However he has not explained how a commercial contract can require a bank to refuse to comply with its legal obligations and render the bank potentially at risk if it does as obliged to do by the law.
I’m with you on this one Richard.
Alex
Very politely – that is absurd
The written consent of counter parties is not required to ensure compliance with the law
You may live in a fantasy world where contract law is all that matters – but that is not the one the Revenue and the Courts live in
I’d suggest you take a sharp draft of reality
In addition: if there are as you say SPVs of no interest to tax authorities – what is the concern. a) They need not worry about disclosure b) these notices probably won’t apply anyway
Richard
“The written consent of counter parties is not required to ensure compliance with the law”
That’s the whole point Richard – there is an argument that the HMRC action is unlawful. I have no idea whether that argument is strong or weak, but if a bank hands over informaton to HMRC, and the HMRC order turns out to be ultra vires, the bank could be sued by its client.
As you have said on another thread, you have to comply with the law.
Alex, what you say doesn’t wash. Consider money-laundering regulations. I am sure that most clients would like to have some agreemnet with me in place so that I can’t make disclosures without telling them first. If I were to enter into such an agreement and then act upon it, I would be making myself a criminal.
Remember we are not talking about handing over information to just anyone willy-nilly. This is disclosure required by the highest authority in the land. If bank officers have landed themselves in a position where they are concerned about consequences of obeying the law, then they have been very silly indeed.
By the way, your commment that they will comply but will have to sort out their consents doesn’t wash either. The law requires that they comply with the request reasonably promptly. If they postpone compliance, might one suspect that they are giving their clients time to prehaps move their funds further from the sight of HMRC?
The principle is quite simple. The bank can’t refuse to comply with its legal obligations, but it also has contractual obligations. Those may require the bank to seek permission before disclosing “confidential information”. In many large commercial contracts that may mean simply everything, not because there is anything underhand, simply because it is not desirable for parties to have the terms of the commercial contracts made available to whomsoever another party might choose.
If a bank has to ask for permission to disclose information, that permission may not be forthcoming for a number of reasons, including delays or inefficiencies in the other party or sometimes just sheer bloody-mindedness (which often happens when there are problems with contracts, i.e. bad loans), in which case the bank will potentially be in breach of its contract when it complies with its legal requirements.
Alex,
I draft contracts like that all the time: it wuld be most unusual if there wasn’t an exemption allowing disclosure when required as a matter of law or regulation.
@James from Durham
The confidentiality provision puts you at risk of breaching your contract. It doesn’t make you a criminal and it doesn’t change your legal obligations.
Your analysis doesn’t really hold much water. Contrary to what people here are implying most of these offshore special purpose companies are used for commercial finance. A typical example might be where Barclays wins the deal to finance Boeing 747’s for Air India, which is achieved by syndicated loans or securitisation. For various reasons to do with withholding tax exemptions for export credit agency debt which would not necessarily apply to securitisations or loan sub participations, the easiest way to structure a deal would be for Barclays to own the aircraft in a Cayman company and lease it in to India and to fund the Cayman company with syndicated loans and debt securities issued to financial institutions round the world. Because the loans are made to Cayman, Air India doesn’t have to worry about grossing up for any withholding taxes due to changes of law and as a result the banks don’t have to worry about Air India’s willingness or ability to pay any grossed up amounts, so everybody is happy.
Barclays problem is that just about every other party to that transaction is located outside the UK, and apart from Barclays role as lead bank and holding a small residual interest in the syndicated paper, there should be no UK interest in the rest of the deal. Hence when Barclays start asking for permission to disclose information they may well get resistance from other parties if they think HMRC is asking for too much.
Alex
As James has pointed out – you’re wrong
A bank does not need a customer’s permission to comply with the law
Nor can it be sued for doing so
Richard
Alex – re most recent comment – all you say is as maybe
But I can’t see an iota of relevance
HMRC is not targeting these arrangements
So what is your point?
Of course a bank can be sued if it does something in breach of a contract. More likely that a party may choose to call an event of default and take whatever remedy they might be permitted under the contract.
HMRC may not be targetting these arrangements, but if they tell the banks that they want the details of transactions in every offshore entity the banks have to go through the same disclosure procedures.
Alex
Just do some research before blogging here again
On anything
Richard
Alex
If a bank’s staff draw up a contract requiring them to break the law, they are just plain daft and incompetent.
It’s unusual for me and Foetus to agree on something but he notes that contracts take the requirements of the law into account and I think he knows what he is talking about (on this!).
Richard
You say you cannot be sued for complying with the law but you fail to recognise that there are various conflicting laws involved. And to correct James from Durham, HMRC is NOT the “highest authority in the land”.
If there wasn’t the possibility of success in mounting legal challenge, I doubt the banks would be considering such action.
You should remember, HMRC doesn’t always act fairly and DOES get things wrong. You should perhaps await the outcome of any court decision, if any, before making such narrow minded statements.
I do worry sometimes about you professional judgement and your ability to see both sides of an argument!
My professional judgement is that tax evasion is illegal and that those who defend those who do it and those who facilitate are guilty of crime by association
My professional judgement is that this requires robust action by law enforcement agencies to uphold the rule of law, the right to tax and the democratic principle
What’s your professional judgement? That facilitating tax evasion is OK?
Nobody disputes that Tax Evasion (not avoidance) is illegal however the way that HMRC behaves is beyond belief.
It’s like the police raiding every house in the UK just so they can catch the minority of people who have something illegal stashed away.
I don’t know how to make this clear but……not all offshore accounts are held by people comitting tax evasion! This may come as a shock to you but, believe it or not, it is true!
Anyway, I was questioning your, lack of, ability to see both sides of an argument and you haven’t disappointed me with your response!
PJM
But there again if you guys offshore actually were open honest and transparent (and you’re a million miles away from that – as everyone knows) HMRC would not need to do this
So stop blaming them for the crime you commit
Richard
It is quite clearly spelled out in Guernsey.
They “feared” an “exodus” of “business” when the Liechtenstein Tax Amnesty arrangement was announced. But when, apparently, PwC did the numbers, the “fear” was downgraded, with a reason explaining in layman’s detail, along with the warning that the conduit would be more closely monitored.
A full page in the local paper.
The probability is that there are a lot of historic structures that pre-date any regulation. Well of course there is. Should they be allowed to continue abusing the law? Oh, and all the other stuff..
I really don’t understand the stance. There is no observable logic that offers any connection between the enforced elevation of the framework that triggers the accumulation of personal wealth as a social driver, and the honest, holistic commitment to the sustainable development and evolution of society. Are we civilised?
Of course that requires that our democracies are sound; but to take the sociopathic, easy way out is to deny the same opportunities that you enjoyed (and you’re all so clever!) for future generations. I don’t need Statistics or Research or Analysis or a Beard or a Mate with a Brain who can talk slowly and in Abstract analogies to see that.
There has to be some redress at some time. Unfortunately those events tend to happen after great social calamity. That also is not difficult to deduce.
For the rest of us; we either comply or use whatever advantages we can arrange to carve a niche. That’s what we are being told to do. So uncared for communities develop their own codes, tribal instinct takes over – on the top you get the Tools who know nothing about humanity, and they are met from the bottom with chaotic desperation. The wilder the lies from the Suits, the equal the opposite.
As the world of the Old Big Business gets begrudgingly examined – a direct function of the power of Humanitarian efforts around the world – the more the social divide is configured.
Come on. We’re beyond all this, surely. There are thousands of years of recorded analysis on human behaviour. The concensus is global, historic and pretty much absolute. And really, really basic.
Don’t lie.
I agree banks should hand over all details of offshore accounts. At the same time everyone in the UK should be made to put their DNA on file with the police ,with their fingerprints and also have video cameras placed in all their rooms at home.
After all only those guilty of crimes and being caught will fear such a thing and not want it.
So you equate wealth preservation with humanity?
Creg
Please don’t be stupid (term used advisedly)
The police have the right to acquire evidence relating to suspected crime in the UK
Your jurisdictions deny that
One heck of a difference that is deliberate, intended to assist crime and which you chose to ignore
Richard
“The police have the right to acquire evidence relating to suspected crime in the UK
Your jurisdictions deny that”
Actually we don’t dent it, that is what TIEA’s are for, if the UK provides evidence to back up their suspicion, then we are happy to provide it.
Just like the police have to provide evidence before a search warrent is provided.
Hence John Doe claims are out, could the police do the same? search everyonesz house they wanted?
Creg
But we know that only Automatic Information Exchange and John Does work in tax
That’s why there is automatic reporting in states
That’s what you deliberately undermine
That makes you secrecy jurisdictions. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
That’s the promotion of criminality
You can’t deny it. There is no other purpose to your refusal
and you know /Tax Information Exchange Agreements as a joke without Automatic Information Exchange which is why you refuse that
I’d give up you can’t win
Richard