On the trail of the offshore tax dodgers

BBC News, by Ian Pollock, Personal finance reporter, 13 December 2011 

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Greg Skyte, the man in charge of the search for
offshore tax dodgers

The government's attempts to squeeze more money from offshore tax dodgers is being run from just about the most nondescript set of offices you could possibly imagine.

Based at the back of a tax advice centre in the middle of Birmingham, the Offshore Co-ordination Unit (OCU) is the latest measure of HM Revenue & Customs (HMRC) to tackle offshore tax evasion.

As the name of the OCU suggests, it will try to co-ordinate the Revenue's scrutiny of the extra information it is now receiving on UK taxpayers with money abroad.

That includes data generated by recent tax deals with the Liechtenstein and Swiss governments.

"The information HMRC holds is vast and we hold about 80 times more data than the British Library," says the new unit's boss Greg Skyte.

"It's about getting a grasp on all the data we have. The unit is about placing the right data with the right people and making the best use of the data we have."

Time to confess

The unit's first salvo has been to write to the first 1,000 of about 6,000 UK residents who were recently revealed to own accounts with the HSBC bank in Switzerland.

They will be asked to certify that they do not owe anything to HMRC - or confess that they do.

The betting must surely be that money will soon come in.

The deal struck with the Liechtenstein authorities in 2009 has already flushed out 1,721 people who have voluntarily admitted they hold untaxed money there.

As of March this year they had already paid over an extra £140m.

All that has happened even before the banks in Liechtenstein start writing, next March, to their account holders from the UK.

They will ask those customers to confirm they are in a regular position with the UK authorities, or tell them to close their accounts and take their money elsewhere.

Surely collecting hidden tax from the HSBC customers will now be a piece of cake, given that the UK authorities know their names and addresses, and details of their Swiss bank accounts as well?

Greg Skyte says previous experience suggests it will not be so easy.

"A lot of it [the money] is put through trust structures, there are company structures involved, and numerous individuals who are linked together and it's not always straightforward," he says.

"It is not always immediately apparent who has ownership of that bank account - we have to establish that before we can establish a liability."

Who are they?

It is no surprise to anyone that there are tax dodgers hiding their money offshore.

So what has the Revenue learned about the ones it has been uncovering recently?

"Anecdotally, people are hiding money offshore not necessarily just for tax purposes, the hiding of the tax is a secondary motive for them," says Greg Skyte.

"We do have cases where individuals have simply stashed significant sums offshore, purely for the purpose of keeping it hidden from the rest of their family," he explains.

That does not make it legal, of course.

His colleagues have also come across a few cases where the money has, apparently, originated in attempts to keep cash and assets out of the hands of the Nazis before and during World War II.

"What we have found under the Liechtenstein disclosure facility is that there are quite a number of individuals, some in the Jewish community, who have hidden their investments and assets from the war," Greg Skyte says.

"This has been passed down from generation to generation, and the assets have built up significantly due to the interest and we are finding instances where those assets run from hundreds of thousands to millions of pounds."

What has motivated the owners of all this cash to come clean now, apart from the fact that the Revenue is on to them?

"Those individuals who have now had it passed down to them are now asking if they really have to disclose this income," Greg Skyte explains.

"There are a lot of individuals who are in their twilight years who have had this playing on their conscience for quite a few years, maybe decades, and who want to come forward to put their tax affairs on the right footing before they die so they don't pass their concerns and liabilities to their children."

Thwarted no longer

The OCU's existence is part of the Revenue's grand plan to squeeze an extra £7bn from tax dodgers in the next few years.

Starting with just 25 staff, the Birmingham unit plans to expand to 100 or so in the next few years.

They are using computer programmes to scrutinise existing HMRC data, and numerous databases the Revenue is building with the information now being supplied to it by offshore banks and investment firms.

The Revenue's efforts to claw back potentially hundreds of millions of pounds of uncollected tax were kick-started in 2006.

After years of being thwarted, it finally won a breakthrough legal case, giving it the right to demand that banks operating in the UK reveal the names and addresses of UK customers with accounts offshore.

Since then, vital deals have been struck to exchange individuals' tax information with the governments of Liechtenstein and Switzerland, after both governments caved in under international pressure.

These countries had been two of the world's most notorious tax havens where secrecy had been the watchword of their banks.

As well as overseeing the existing operation of the Liechtenstein "disclosure facility" and the HSBC cases, the OCU will also directly scrutinise the affairs of up to 500 people a year, whose bank details the Revenue will soon be able to request from the Swiss authorities.

Not enough staff

Greg Skyte expects that quite a significant number of people his unit contacts will end up owing nothing to the UK tax authorities.

"Maybe they are not UK resident although they have a UK address, and [then there are] those who are non-domiciled. They may not fall under the UK tax umbrella," he points out.

"Because of their non-domiciled status, provided they hold their investments offshore, and they don't remit any of that income to the UK, they won't be chargeable on that liability."

What if people simply do not respond to a letter from the Revenue, or the UK's tax inspectors don't believe the person's claim that there is nothing to declare?

Greg Skyte says each case will be assessed, and if there is reasonable evidence the person has been less than frank they will receive further scrutiny.

But he admits that his department will not have the staff or resources to, for instance, call in all 6,000 people on the HSBC list for a grilling.

"It just isn't practical to issue letters inviting each and every one of those to come in," he says.

"We don't have the resource, short term, to take forward enquiries on such a scale. But we will ask questions on a significant number of those cases."

That does not mean someone can expect to get away scot-free simply by lying and signing a certificate saying they have no UK tax to pay.

Anyone who responds this way, even if they are not followed up immediately, will find they stay on file, with the information they supplied cross-checked in the future against other records held by both HMRC and foreign tax authorities.

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