HMRC hounds offshore investors to whistleblow on advisers

11 August 2010

HM Revenue & Customs (HMRC) has sent a letter to 600 offshore account holders asking them to inform on their advisers' involvement in tax avoidance. In a letter sent this week and seen by IFAonline, HMRC says it would like to "understand more" about how offshore accounts are used by people in the UK. But sources close to HMRC say the real motive of the letter is to find out how offshore products are being sold and if financial advisers are colluding in tax avoidance. The letter was sent to all investors who made a voluntary disclosure in 2007 using the Offshore Disclosure Facility and included details of bank accounts held outside the UK. It states: "We would like to ask you a few short questions about how you opened, operated and maintained your accounts." Investors are then given a reply form to send to HMRC to say they are happy to be telephoned to give information. Investors are told they do not need to take part in the research if they do not want to, and that it is not an inquiry into their tax affairs. To persuade investors to come forward, the letter makes clear it is the selling mechanisms and rationale behind their investments, not the personal tax situation of individual investors, which interests HMRC. "Any information given to us during this call will be treated in confidence and will not be used for the purpose of reviewing your own personal affairs," it states. "We will not be asking you for any financial information during the call. Details such as your account numbers or balances will not be discussed. " The letter will stoke fears among advisers already nervous they may be next on the taxman's hit list, following HMRC probes into financial professionals promoting what it deems ‘unacceptable tax avoidance schemes'. One City law firm says IFAs are increasingly taking out business disruption insurance against regulatory investigations, in light of HMRC's increasingly "aggressive" low-tax clamp-down. The coalition Government says it intends to "take a more strategic approach to the risk of avoidance to prevent increasing complexity and reduce the need for frequent legislative change". In Chancellor George Osborne's emergency Budget, the Government said it is looking into rescuing the tax General Anti-Avoidance Rule (GAAR) to help close tax avoidance loopholes. GAAR would give HMRC more extensive and widely-drafted powers to judge tax liabilities. Capital gains tax (CGT), inheritance tax, corporation tax and income tax would all come under closer scrutiny under the rule. Published by IFAonline