HMRC target offshore

Northampton chartered accountants Harris & Co, recently revealed that HMRC are targetting offshore trusts.

Offshore trusts are set to come under scrutiny from May as part of HMRC’s monthly target campaigns to tackle tax evasion.

The move coincides with the announcement that Bermuda and other British overseas territories with financial centres have agreed to share tax information with the UK authorities. This follows similar deals agreed recently with Jersey, Guernsey and the Isle of Man.

Last year, HMRC set out their plan for tackling tax evasion by providing details of planned monthly activity to further tackle tax evasion. This month the tax authority committed to identify offshore trusts that are being used to hide income and wealth overseas, as well as roll out new data-driven tools to help identify affluent individuals who are evading tax.

Gary Heynes, Baker Tilly’s head of private client, says the move may catch out some people who have failed to keep up with changes in legislation, and that anyone in this position should act quickly.

Heynes said: ‘Offshore trusts have come under a great deal of attack over recent years; only a couple of decades ago the tax rules on overseas trusts were relatively relaxed, and so many people used offshore arrangements. The primary purposes of trusts is for asset protection and while there is less impact on non-UK resident or non-UK domiciled individuals, the current stringent regime means most UK resident individuals would be subject to income, capital gains and inheritance taxes on monies held within offshore arrangements.’

Individuals who fail to inform HMRC of their offshore arrangements could face penalties as high as 200% of the tax outstanding, and also run the risk of criminal prosecution.

‘My advice to those with funds in offshore trust arrangements is that they should ensure that they are compliant in the UK, and if they aren’t - possibly because they have not kept pace with the change in tax laws - then look to make a disclosure to HMRC before they come asking for the tax,’ Heynes said.