Tax avoidance threat to offshore bank customers

HM Revenue & Customs (HMRC) has triggered a new wave of tax avoidance action against offshore bank account holders.

Thousands of letters have gone out to taxpayers and expats who hold accounts with HSBC’s branch on the Channel Island of Jersey.

The taxpayers must sign and return a declaration by December 31, 2015, confirming that they have declared all interest earned and capital gains from their accounts held with the bank on Jersey.

If the declaration is not returned, the letter threatens HMRC will start a tax investigation to establish if any avoidance has taken place.

Details of HSBC’s Jersey customers were passed to HMRC three years ago by a whistle-blower who claimed the bank was helping them to avoid tax.

Whistle blower

Around 50% of the bank’s Jersey accounts are thought to belong to UK taxpayers or expats.

HMRC explained the letters were just general inquiries.

“We are not accusing any of these account holders of wrongdoing,” said an HMRC spokesman.

“All we are doing is offering those who believe their financial and tax affairs are in order a chance to sign a declaration to that effect.

“If they don’t know, then they should not sign the certificate and should take professional tax advice, disclose any undeclared income or gains and pay the tax they owe.”

HMRC confirmed at least one in 10 HSBC customers had already returned their certificates.

Warning about signing certificate

Tax experts are warning HSBC’s Jersey customers to take the letters seriously.

“If any one signs the certificate and HMRC was then to discover their tax affairs were not in order, they could be open to a criminal prosecution for tax evasion because returning the document could be construed as evidence that they were deliberately misleading the tax authority,” said Adam Craggs, of tax consultancy RPC.

Although the letters are from HMRC, HSBC customers can ignore them at the risk of provoking a tax inquiry as they have no legal obligation to return the certificate.

However, the offshore voluntary disclosure schemes for taxpayers who may not have declared all their offshore assets and earnings end on December 31, 2015 – which means they face stiffer penalties for not revealing their tax secrets to HMRC by not returning the letter.

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