Maritime International Advisor

British Banks Give Details on Offshore Accounts to HMRC

HM Revenue and Customs (HMRC) has obtained information on offshore bank accounts held by UK citizens and/or residents in British banks in a number of Offshore Centres
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June 5, 2007 - You are likely aware by now that HM Revenue and Customs (HMRC) has obtained information on offshore bank accounts held by UK citizens and/or residents in British banks in a number of Offshore Centres, including the Channel Islands and the Caribbean. HMRC is now reviewing this information with a view to collecting unpaid taxes.

Maritime International Ltd broke this story in its Advisor Newsletter, in April of 2006, after a "landmark" court decision in the UK against Barclays Bank which "will allow it (HMRC) to access the computer banking records of British banks holding offshore banking records in mainland Britain". At that time, we noted that the ruling "is expected to be applied shortly against all British banks with offshore computer records held in mainland Britain".

It would appear now that, besides Barclays, the latest banks added to the "hit" list are HSBC, Royal Bank of Scotland, HBOS and Lloyds TSB.

HMRC has warned that it now possess sufficient information to begin investigating bank account holders with suspected tax liabilities. It has however, offered an "amnesty" to such account holders if they disclose their information to the HMRC by June 22, 2007. They will then only be liable to pay the back taxes plus a 10% penalty, instead of being hit with much larger penalties and possibly prosecution.

The information obtained by HMRC on off.shore bank accounts is thought to arise from the UK court's decision of last year to allow HMRC access to banking computers in London, some of which contain information on bank accounts actually held in other off.shore centres. While the details are unclear, it appears that some British banks have been keeping the off.shore account records of some of its smaller subsidiaries located in other off.shore jurisdictions, on the bank's computers in London. Other information obtained by HMRC arises from the transfer of funds from British banks to other off.shore jurisdictions. Of course, the European Savings tax Directive is also a source of information on the accounts of British citizens and/or residents.

Maritime International Ltd has few if any clients in British banks, as we primarily recommend sovereign banks in independent jurisdictions. There may, however, be some who have specifically requested banks outside of our recommended lists. If any of our clients are uneasy about this latest UK tax measure, they should contact their UK accountant or advisor immediately, as the "amnesty" only lasts until June 22, 2007.

Some UK accountants have warned that many innocent UK tax payers may be caught up in these investigations, particularly those owning property abroad. Many do not fully understand UK tax laws and believe they are only liable for taxes if the money is brought back into the UK. Again, UK persons should seek professional advice if they are unsure of their tax status.

Clients who are not subject to UK tax laws have nothing to fear from this latest attack on British banking privacy. If, however, clients are uncomfortable keeping their accounts in British banks, we would be pleased to assist in the opening of new bank accounts elsewhere.

The question has arisen also as to whether non-British banks with their bank account computers physically located in the UK, the Channel Islands and/or UK dependent territories in the Caribbean, might be required to give up similar information in the future.

On another issue; we reported last August that British banks may have to give up their banking Encryption Keys to the UK Government and allow access to their banking records at any time. This matter is still on-going as the UK intends to activate Part 3 of the RIPA, passed in 2000. It seems likely that legislation on this matter will be presented sometime soon.

Stay tuned for further developments on these issues.

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