HMRC have issued a statement relating to last year’s limited amnesty for undisclosed offshore accounts. It will be remembered that an opportunity arose for those with such accounts to disclose them and pay a fixed 10 percent penalty, rather than to feel the full weight of HMRC falling on them for lack of disclosure. HMRC do not like to call this an “amnesty,” because nobody is being relieved of any tax; those to whom it applies are just paying a limited penalty. “Offshore Disclosure Facility” is the preferred term.  

HMRC had the advantage of successfully applying to the courts for disclosure of the offshore bank accounts of a number of major banks. This meant that those with such accounts could never be sure whether the details had already been provided to HMRC and they ought, therefore, to come clean for fear of worse consequences awaiting them. HMRC subsequently issued a statement warning that those who failed to disclose would be subject to investigations that would be “intrusive and thorough”.  

HMRC has now issued a statement saying that they are pursuing those with offshore accounts who did not come forward under the offshore disclosure facility. This is obviously entirely reasonable.  

The Pre-Budget Report confirms that offshore account holders will be given “a new opportunity in 2009 to disclose of their own accord if they have unpaid tax or duties and to settle debts. A further announcement will be made in early 2009”. I would not want HMRC to strain the quality of their mercy, but this must surely undermine their original amnesty. You must disclose, or terrible consequences will befall you – such as, you will be given another opportunity later? This must surely be counterproductive. Maybe there will be an imaginative solution when it is published.

It is also suggested that HMRC intend to seek information from a new tranche of financial institutions using the same legal powers that applied to the banks. Let us hope that HMRC do not enjoy the same degree of success in the courts. The abandonment of banking confidentiality, for no better reason than that the bank may have other customers who do not deal properly with their tax affairs, is damaging at many levels. A further flight of capital to jurisdictions of equal probity, but that respect banking confidentiality, will only make our present troubles worse. Whilst nobody would support concealment of taxable income, this suggested cure will be worse than the disease.