British territories targeted by Inland Revenue 'hitmen'

Tuesday, October 14, 2003

LONDON, England: According to a recent report in the London Times, the British Inland Revenue has appointed 64 tax-inspecting "hitmen" as part of a huge offensive aimed at recovering billions of dollars of unpaid tax secreted in companies and trusts in offshore tax havens such as the British Virgin Islands, the Cayman Islands and the Turks & Caicos Islands.

Using a new computer database, the Offshore Arrangements Project has identified 30,000 UK companies whose offshore shareholders are to be the subject of investigation. 

In addition, the Revenue is targeting suspect property transactions and intends to use new disclosure rules to collect more information about property owners and trustees from the Stamp Taxes Office. 

An inspector of taxes has been appointed to each of the Revenue's 64 area offices. The inspector can shift resources from chasing local tax cheats to targets in Crown dependencies, such as the British Virgin Islands and the Cayman Islands.

Reg Day, tax director of KPMG, the accountants, said the crackdown on large-scale evasion in tax havens was a timely move. He said: "The Revenue has been criticised for not hitting targets and they are trying to catch up. 

"The Offshore Arrangements Project is a cluster bomb and it is being dropped now." 

In a circular to tax practitioners revealing details of the Offshore Arrangements Project, the Revenue said that entities in offshore financial centres "control thousands of UK companies" and significant UK land holdings.

Mr Day said that directors of offshore companies were already receiving letters from the Revenue, which would expose them to potential conflicts of interest. These included demands for names of beneficial owners, the latest accounts, and details of where the company paid tax. Trustees and offshore directors are likely to have signed confidentiality agreements with clients, but are also ultimately liable for all tax liabilities of the company. 

Revenue inspectors are becoming more confident and aggressive, demanding that banks reveal details of offshore credit card payments. Evidence has been found of UK high street banks giving clients access to internal "sundries accounts" to transfer funds in secrecy offshore. Mr Day said: "The Revenue knows the money is out there. They are using these new weapons to ferret it out." 

The new law will require EU banks to disclose details of income earned on savings held by EU citizens. The British Chancellor of the Exchequer, Gordon Brown, has threatened to impose the new rules on UK dependencies by direct legislation if they refuse to comply.

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