UK tax authorities cast net wider for offshore money
The UK tax authorities are upping their efforts to extract money from the wealthy. They are focusing increasingly on closing tax avoidance schemes as they continue to gather information on the country’s wealthiest individuals.
Ronnie Ludwig, a partner at private client accountancy firm Saffery Champness, said: “HM Revenue & Customs is singling out tax avoidance by the rich more than ever before and moving swiftly to close loopholes – they are even looking at enforcing fines on these loopholes.”
Tax avoidance schemes are often constructed to avoid paying income tax, or other taxes, on all or part of an individual’s taxable income. Often these schemes channel money through other countries or assets to avoid the full amount due on the local tax.
In recent months, Revenue & Customs has been taking a tougher stance on such schemes. A spokesman for Revenue & Customs said: “We are cracking down much swifter to close tax avoidance schemes and will ensure those using such schemes will face tougher measures in the future.”
The move comes at a time when the UK tax authorities have gained an unprecedented amount of information on the wealthy as numerous Tax Information Exchange Agreements with offshore financial centres are signed.
The UK has signed about 20 of these agreements, most recently with Liechtenstein and Switzerland.
Sue Holmes, head of tax investigations at accountancy and financial services group Smith & Williamson, said: “Revenue & Customs’ massively improved information gathering powers mean it can target taxpayers with the aim of ensuring tax compliance and increasing tax yield. The tax authorities are particularly targeting the wealthy and looking at their offshore structures.”
Earlier this year, Revenue & Customs set up a high net worth unit, which Holmes said enjoys a 20-fold increase in investigative powers compared to its predecessor, the Complex Personal Tax Teams.
The high net worth unit has 500 staff based around the UK, targeting 5,000 of the wealthiest people in the country, as opposed to its predecessor that had to deal with more than 100,000 cases with a similar level of staffing.
It will also look into the total wealth of these individuals.
The Revenue & Customs spokesman said: “The selection of customers for HNWU is by reference to their wealth that goes beyond mere cash to include other assets such as business interests, investments and properties.”
Offshore structures will also be targets and those affected by the investigations will include resident, non-domiciled individuals. A UK tax amnesty was introduced at the beginning of the month that will allow people with offshore tax irregularities to disclose investments before March 2010, to incur a lighter penalty than if they fail to come forward.
The Revenue & Customs spokesman said: “This is the last chance for those with undeclared offshore money. If they don’t come forward now, they will face particularly tough measures, even imprisonment in some cases.”
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