After a long period during which it appeared that HM Revenue & Customs didn't quite know what to do next, the past few months have seen a flurry of activity on offshore bank accounts and tax evasion. First came news of a possible deal covering UK residents with Swiss bank accounts.
Indications are that agreement will be reached on withholding tax and some sort of information exchange. Then, in January, HMRC revealed that two British citizens had been arrested on suspicion of using accounts with HSBC Switzerland to evade tax. The arrests are thought to have resulted from the analysis of data relating to thousands of HSBC accounts, stolen by a disgruntled employee, who passed it to the French authorities who then passed it on to HMRC. More arrests must surely be imminent.
The people concerned have been released on bail while the Crown Prosecution Service decides whether to bring criminal charges. Second, the Wikileaks website announced that a whistleblower was due to hand over information relating to 2,000 prominent people who have accounts with another Swiss bank. This information will surely also find its way to HMRC.
At the end of January, HMRC announced increases to the penalties for failure to declare funds held in countries that refuse to exchange information with the UK (fines of up to 200 per cent of their tax bill or up to 150 per cent for more co-operative countries) - coming into effect on April 6.
In February, an events organiser who concealed commission paid into his Dubai bank account was sentenced to six months in prison, suspended for two years, and a community punishment order.
Finally, in March came the announcement of the Plumbers Tax Safe Plan (PTSP) - an opportunity to come clean about undeclared tax liabilities that may also attract those with no offshore (or plumbing) connection. Notifications must be made by May 31, 2011. HMRC has information from Corgi/Gas Safe, suggesting gaps between income earned and income declared. The focus, however, is far wider than this and HMRC has made it clear that those in other occupations can use the same disclosure process.
For some time now HMRC has presented a carrot in the form of the generous Liechtenstein Disclosure Facility (LDF) for those with undeclared offshore liabilities. The PTSP is an extension of similar (slightly less generous) terms to the population at large. To accompany these carrots, however, there is now a very big stick. The risk of being caught is increasing and the consequences could be severe. There are some who, because of the severity of their offence or the need to make examples of certain cases, will end up not only with penalties or fines but with a criminal record. We have warned before about the net closing in.
Now it is really happening. If you have evaded tax via offshore accounts, whatever the source of the funds concerned, or not declared your UK income or gains in full, the odds are stacked against you. Go to the Revenue before it comes to you. If you have used any offshore jurisdiction, the simplest, safest and cheapest option is the LDF. Yes, you have to pay some tax but nothing for periods before April 6 1999; the penalty is fixed at just 10 per cent; and, as soon as you advise HMRC of your intention to disclose, you are immune from prosecution for tax offences, provided you then make a full disclosure. If there is no offshore dimension, the PTSP (or similar terms, open to all) may be too good to miss.
Not all holders of offshore accounts or investments have evaded tax. But it is clear that just having an offshore account is enough to attract the attention of HMRC and that, if it does not yet know of the account's existence, it probably will soon. Similarly, if you have evaded tax in the UK, HMRC is likely to find out. If you have not been fully tax-compliant, or if you are unsure, take advice and take it now.