Chancellor George Osborne has revealed a new tax evasion strategy is ready to start to benefit from financial information about taxpayers with offshore accounts.
HM Revenue & Customs has started receiving data from overseas financial institutions and tax authorities about cash and investment held by British taxpayers and is busy comparing the revelations with declared income on tax returns.
The New Year will see this monitoring trigger a raft of tax investigations aimed at raising £9 billion over five years that HMRC suspects is lost to tax evasion, avoidance and errors.
The information comes from tax information exchange treaties recently signed with the US and British overseas territories and Crown Dependencies that have thrown off a veil of secrecy formerly shrouding financial details of offshore investors.
“Having sound public finances also means making sure that we collect the taxes that are due,” said Osborne in his Budget Autumn Statement 2013.
Tax avoidance
“Most wealthy people pay their taxes and make a huge contribution to funding our public services.
“The latest figures show that 30% of all income tax is paid by just 1% of taxpayers.
“We’ve given incentives to enterprise, cut punitive tax rates.
“But alongside those paying the most tax are those who try to avoid paying their fair share of tax.
“So today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament.”
This year, Britain has signed tax agreements with the Isle of Man, Guernsey, Jersey, the Cayman Islands, Gibraltar, Bermuda, Montserrat, the Turks and Caicos Islands and the British Virgin Islands.
Other tax information exchange treaties will kick in next year as deals under the US Foreign Account Tax Compliance Act start in July 2014.
FATCA pact
The FATCA pact will deliver financial information about British taxpayers with bank accounts and investments in the US.
As part of the initiative, Britain is also increasing the number of HMRC officials attached to British missions to monitor tax evasion and organised crime, like smuggling.
Osborne also took the opportunity to confirm new laws are on the way to force promoters of tax avoidance schemes to give HMRC more information about their schemes – and to fine them more if they do not.
Also, taxpayers involved in avoidance schemes will have to amend tax returns and amend the fines and penalties for involvement in a failed scheme.
Instead of holding on to their cash during court and tribunal hearings, they will have to pay tax in advance and receive a refund should the cash go their way before a judge.
