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| Greg Skyte, the man in charge of the search for offshore tax dodgers |
The
government's attempts to squeeze more money from offshore tax dodgers is being
run from just about the most nondescript set of offices you could possibly
imagine.
Based at
the back of a tax advice centre in the middle of Birmingham, the Offshore
Co-ordination Unit (OCU) is the latest measure of HM Revenue & Customs
(HMRC) to tackle offshore tax evasion.
As the name
of the OCU suggests, it will try to co-ordinate the Revenue's scrutiny of the
extra information it is now receiving on UK taxpayers with money abroad.
That
includes data generated by recent tax deals with the Liechtenstein and Swiss
governments.
"The
information HMRC holds is vast and we hold about 80 times more data than the
British Library," says the new unit's boss Greg Skyte.
"It's
about getting a grasp on all the data we have. The unit is about placing the
right data with the right people and making the best use of the data we
have."
Time to
confess
The unit's
first salvo has been to write to the first 1,000 of about 6,000 UK residents
who were recently revealed to own accounts with the HSBC bank in Switzerland.
They will
be asked to certify that they do not owe anything to HMRC - or confess that
they do.
The betting
must surely be that money will soon come in.
The deal
struck with the Liechtenstein authorities in 2009 has already flushed out 1,721
people who have voluntarily admitted they hold untaxed money there.
As of March
this year they had already paid over an extra £140m.
All that
has happened even before the banks in Liechtenstein start writing, next March,
to their account holders from the UK.
They will
ask those customers to confirm they are in a regular position with the UK
authorities, or tell them to close their accounts and take their money
elsewhere.
Surely
collecting hidden tax from the HSBC customers will now be a piece of cake,
given that the UK authorities know their names and addresses, and details of
their Swiss bank accounts as well?
Greg Skyte
says previous experience suggests it will not be so easy.
"A lot
of it [the money] is put through trust structures, there are company structures
involved, and numerous individuals who are linked together and it's not always
straightforward," he says.
"It is
not always immediately apparent who has ownership of that bank account - we
have to establish that before we can establish a liability."
Who are
they?
It is no
surprise to anyone that there are tax dodgers hiding their money offshore.
So what has
the Revenue learned about the ones it has been uncovering recently?
"Anecdotally,
people are hiding money offshore not necessarily just for tax purposes, the hiding
of the tax is a secondary motive for them," says Greg Skyte.
"We do
have cases where individuals have simply stashed significant sums offshore,
purely for the purpose of keeping it hidden from the rest of their
family," he explains.
That does
not make it legal, of course.
His
colleagues have also come across a few cases where the money has, apparently,
originated in attempts to keep cash and assets out of the hands of the Nazis
before and during World War II.
"What
we have found under the Liechtenstein disclosure facility is that there are
quite a number of individuals, some in the Jewish community, who have hidden
their investments and assets from the war," Greg Skyte says.
"This
has been passed down from generation to generation, and the assets have built
up significantly due to the interest and we are finding instances where those
assets run from hundreds of thousands to millions of pounds."
What has
motivated the owners of all this cash to come clean now, apart from the fact
that the Revenue is on to them?
"Those
individuals who have now had it passed down to them are now asking if they
really have to disclose this income," Greg Skyte explains.
"There
are a lot of individuals who are in their twilight years who have had this
playing on their conscience for quite a few years, maybe decades, and who want
to come forward to put their tax affairs on the right footing before they die
so they don't pass their concerns and liabilities to their children."
Thwarted no
longer
The OCU's
existence is part of the Revenue's grand plan to squeeze an extra £7bn from tax
dodgers in the next few years.
Starting
with just 25 staff, the Birmingham unit plans to expand to 100 or so in the
next few years.
They are
using computer programmes to scrutinise existing HMRC data, and numerous
databases the Revenue is building with the information now being supplied to it
by offshore banks and investment firms.
The
Revenue's efforts to claw back potentially hundreds of millions of pounds of
uncollected tax were kick-started in 2006.
After years
of being thwarted, it finally won a breakthrough legal case, giving it the
right to demand that banks operating in the UK reveal the names and addresses
of UK customers with accounts offshore.
Since then,
vital deals have been struck to exchange individuals' tax information with the
governments of Liechtenstein and Switzerland, after both governments caved in
under international pressure.
These
countries had been two of the world's most notorious tax havens where secrecy
had been the watchword of their banks.
As well as
overseeing the existing operation of the Liechtenstein "disclosure facility" and the HSBC cases, the OCU will also directly scrutinise the
affairs of up to 500 people a year, whose bank details the Revenue will soon be
able to request from the Swiss authorities.
Not enough
staff
Greg Skyte
expects that quite a significant number of people his unit contacts will end up
owing nothing to the UK tax authorities.
"Maybe
they are not UK resident although they have a UK address, and [then there are]
those who are non-domiciled. They may not fall under the UK tax umbrella,"
he points out.
"Because
of their non-domiciled status, provided they hold their investments offshore,
and they don't remit any of that income to the UK, they won't be chargeable on
that liability."
What if
people simply do not respond to a letter from the Revenue, or the UK's tax
inspectors don't believe the person's claim that there is nothing to declare?
Greg Skyte
says each case will be assessed, and if there is reasonable evidence the person
has been less than frank they will receive further scrutiny.
But he
admits that his department will not have the staff or resources to, for
instance, call in all 6,000 people on the HSBC list for a grilling.
"It
just isn't practical to issue letters inviting each and every one of those to
come in," he says.
"We
don't have the resource, short term, to take forward enquiries on such a scale.
But we will ask questions on a significant number of those cases."
That does
not mean someone can expect to get away scot-free simply by lying and signing a
certificate saying they have no UK tax to pay.
Anyone who
responds this way, even if they are not followed up immediately, will find they
stay on file, with the information they supplied cross-checked in the future
against other records held by both HMRC and foreign tax authorities.
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