TAXATION

Revenue’s wholesale trawl of offshore bank accounts

HM Revenue & Customs (HMRC) has stepped up investigations into people with offshore bank accounts. The crackdown follows the implementation last July of the European Union Savings Directive, which allows EU states and some offshore territories including Jersey, the Isle of Man and Guernsey to exchange more details about bank accounts.

Last year around 500 individuals received letters from HMRC asking them why they thought they were not liable to tax on their offshore bank interest. Individuals who are resident and domiciled in the UK are taxable on investment income wherever in the world it arises. Those who are resident in the UK but domiciled elsewhere are liable to tax on overseas investment income, but only if they bring it into the UK. Anyone who does not disclose all their interest in reply to such a letter is likely to face a full enquiry, often by a specialist HMRC investigation office.

Under the European Savings Directive, individuals with offshore bank accounts must either suffer a withholding tax, currently 15%, or agree to the exchange of information.

Whichever is the case, you must declare overseas interest on your UK tax return unless you are not domiciled in the UK and do not remit the income. If you receive one of these letters from HMRC, please let us know immediately.