Millions of taxpayers have recently received letters warning them of the ‘life-changing consequences’ of failing to declare secret offshore accounts. Advisers and financial institutions were legally required to inform clients of the risks of holding undeclared accounts in so-called tax havens by the end of August this year, leading to a huge number of letters being sent out over the past month.
The letters outline the global transparency drive giving HMRC new information about financial assets held in over a hundred countries, as well as increased penalties and the higher risk of criminal prosecution for those not disclosing either foreign income or capital gains. On the basis that financial advisers and institutions are more knowledgeable about their clients’ offshore income than HMRC, the government made the decision to pass down the responsibility of raising awareness to them. However, as many have struggled to determine exactly which of their clients hold offshore assets, many have ended up sending letters to the vast majority of their client lists.
The letters contain instructions from HMRC to ‘act now’ and inform taxpayers of fines of up to 200% of any unpaid offshore tax, with a warning that the penalties are set to increase further still through a new system to be introduced in September 2018. The letter describes the penalties being ‘based on the value of the asset as well as the tax due, resulting in potentially life-changing consequences’.
