Tax evaders should act now to come clean

Tax evaders should treat the news that HMRC is writing to, potentially, more than 6,000 individuals and organisations holding accounts in HSBC Geneva as an urgent wake-up call, says McGrigors, the leading commercial law firm and tax investigation specialists.  This is part of an ongoing operation by HMRC, which has already launched criminal or serious fraud investigations into more than 500 individuals and organisations holding accounts in HSBC Geneva.

The move follows the signing earlier this month of a treaty between the UK and Swiss governments.  The treaty, which comes into force in 2013, will see British taxpayers who have taken advantage of Swiss banking secrecy laws for tax evasion purposes paying a charge of between 19pc and 34pc on their assets to settle past liabilities.

Phil Berwick, Director at McGrigors, comments: “Some tax evaders may have seen the UK Swiss tax deal as setting a deadline for sorting out their tax affairs.”

"Rather than starting serious fraud investigations, taxpayers are being given an opportunity to come forward.  For many, the best route will be the Liechtenstein Disclosure Facility, which offers immunity from prosecution for tax offences, and favourable settlement terms".

“HMRC’s announcement today is intended as a strong signal that the deal is only one part of their efforts to clamp down on tax evasion.”

“This aggressive approach tells those who are hoping that they have a year to tidy up their tax affairs that the net may already be closing in on them. For many, it will come as a very nasty surprise.”

Many taxpayers would be better off using the Liechtenstein Facility than risk waiting for HMRC to start an investigation

McGrigors says that one opportunity for those who owe tax to regularise their affairs is through the existing Liechtenstein Disclosure Facility (LDF).

Phil Berwick explains that there are several advantages to making disclosures under the LDF rather than the UK-Swiss tax agreement (which comes into force in 2013), including the following:

  • There is immunity from prosecution for tax offences under the LDF, but no such protection under the Swiss tax agreement
  • The Swiss tax treaty only covers funds held in Swiss bank accounts, but the LDF covers all an individual’s worldwide assets
  • HMRC may seek to prosecute those taxpayers using the Swiss tax treaty who failed to make a full disclosure under a previous disclosure process (whereas those people can use the LDF without fear of prosecution)
  • The overall tax liability may be significantly less – in particular where the majority of the tax arose before April 1999.  In some cases taxpayers have had to forfeit only between 5% and 15% of their overall assets – but may face 34% under the Swiss deal.
  • The LDF offers finality on a taxpayer’s affairs, and is available now, whereas the Swiss agreement does not come into force until 2013
  • There is scope to discuss complicated issues, including those relating to residence and domicile, on, initially, a “no-names” basis

Phil Berwick says: “Many taxpayers with undeclared assets in Switzerland will be better-off making a disclosure under the Liechtenstein amnesty giving them comfort that they will not prosecuted, and finality in their tax affairs.”

“There are of course other ways to wipe the slate clean, and anyone worried about their tax affairs should seek specialist advice.”

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