Ruling: banks must reveal clients’ offshore account details

| February 2, 2007 | 0 Comments

After a legal dispute, four UK banks will be forced to hand over the details of offshore bank accounts held by approximately 100,000 customers to Revenue & Customs so that unpaid taxes can be collected. The ruling does not extend to secret Swiss bank accounts and some other offshore jurisdictions, however. But the information on accounts held in offshore accounts in places such as the Channel Islands is expected to lead to the collection of up to £275 million in unpaid taxes. While it has been legal to put money into such offshore accounts since 1979, concealing the amount of interest earned in an effort to avoid paying taxes on it is against the law.

The banks involved in the ruling are believed to be HSBC, HBOS, Royal Bank of London and Lloyds TSB. However, none of the banks were willing to confirm that they were included in the ruling. While HSBC said that it was aware of the ruling, the other three banks refused any comment on the issue. A similar ruling was issued in regards to clients of Barclays last year. The special commissioner who decided in favor of Revenue & Customs in the present instance said that he had taken his decision because it was, in his view, the only way that investigators could access the information they need.

Revenue & Customs is expected to announce in the spring that it will offer reduced penalties for investors who come forward and report their interest earnings from the offshore accounts voluntarily. The plan, now expected to be announced in April, will likely offer a reduced penalty of around 10 percent of the maximum during a limited period of about six weeks, although account holders will still be liable for 20 years of unpaid tax and interest. They will then have four months to complete disclosure and pay any taxes owed.

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