Offshore Tax Investigations

Ten Practical Tips For Clients

Tip 1:  If in doubt, ask an expert.

I know it sounds obvious, but you’d be amazed at how many people try to sort out complex technical issues without taking advice – sometimes with predictably disastrous results. Tax issues relating to offshore income and assets can be very complex. So if you are not sure whether you are affected,  just pick up the phone and call us.  We don’t charge for initial calls, and we may just be able to save you a whole lot of time, worry and money.  And, yes, we do understand that you might not feel able to call your regular accountant, for various reasons.  We’ve seen it all before, and our job is to sort out these situations for you.

Tip 2: Review your offshore assets

If you have any form of offshore funds or assets we would recommend that you undertake a review to ensure that they are being correctly dealt with for tax purposes.  That way, if there is a problem, at least you can get it sorted out before HMRC come knocking on your door.Please see our notes regarding an initial strategic review.  You will then either have peace of mind, or you will know that you have a potential problem and can do something about it.

If you would like a review please call Tony Borman on 0845 643 5450 or email help@covertax.co.uk

There is nothing wrong with holding assets or funds offshore.  However, HMRC know from experience that there is a high incidence of tax evasion associated with offshore funds. Sometimes it is a deliberate hiding place for undeclared income, other times it is legitimate savings deposited on the advice of a financial advisor or bank. Either way, the taxman knows that where there is an offshore account there is a high chance that tax has been underpaid.

Over recent years the net has been closing around offshore bank accounts.  HMRC has now obtained orders requiring over three hundred banks with branches in the UK to supply details of all their customers holding offshore accounts.  The NDO was a chance for anyone who has unpaid tax relating to an offshore account to come forward and settle on favourable terms.  The NDO has now gone, but it is still possible to sort things out before the taxman comes to you. And this will always lead to a more favourable settlement.

The taxation of offshore assets and income can be very complex and can be affected by your residence and domicile position as well as the form in which the funds are held. We have seen many examples of people who set up offshore savings in good faith believing them to be tax free and were surprised to find they were not.

If you would like a review please call Tony Borman or email help@covertax.co.uk.

Tip 3:  Don’t bury your head in the sand

If your head is in the sand, you know where your backside will be – sticking in the air waiting for the taxman to kick it!

However bad the consequences of disclosure appear to be, the consequences of discovery following non-disclosure are worse.  We have seen these situations over and over again, and taking positive action to sort things out is always the best tactic. When handled by an expert, the situation is rarely as bad as you fear.  The alternative is that you will be left with a secret ticking time bomb, and your worry and stress will only grow as time goes by.

If you have undeclared income offshore (or in the UK for that matter) we know that making a disclosure might be extremely difficult.  We have handled many such cases and we understand that there are often complicating factors which have to be faced.  For example, it might involve implicating third parties, or perhaps business partners are unaware of the problem, or your spouse.  Or  maybe the money has been spent and you don’t know how you can settle the tax bill. Or it was invested in a property which has gone down in value and won’t sell. Or maybe you are just plain ashamed of yourself, or afraid of the consequences of disclosure.  Perhaps you have been under investigation before and have made an incomplete disclosure, or you are in a professional position and are fearful of what action HMRC might take.  Or maybe you just can’t face the thought of your ‘nest egg’ being wiped out.

Don’t stick your head in the sand.  Call 0845 643 5450 for a free consultation.

Tip 4:  Liechtenstein gets special treatment

If your funds are in Liechtenstein there is a special arrangement, the Liechtenstein Disclosure Facility (‘LDF’).  This is more generous than the NDO.  Please see our separate page:

• Liechtenstein Disclosure Facility

Even if your funds are not in Liechtenstein it may be possible to obtain the greater benefits of the LDF by transferring funds to Liechtenstein.  This is highly complex and should only be attempted under advice from an expert.  Call us for a detailed discussion on how it works.

Tip 5:  Don’t try DIY

Have you ever had the experience of trying to save money by attempting DIY, only to wish you’d got the tradesman in to start with?  Well this is no different.  If you don’t have experience in offshore tax disclosures, we don’t recommend that you practice on yourself. Same goes for your professional advisor. There’s no shame in it – we can’t all be experts in everything. But we at Covertax are experts in offshore disclosures and all types of tax investigation.

We are expert professional advisors, so to get us involved will cost money. But we will always try to deliver value for money, whatever the level of our fees. We will usually be able to agree fixed fees, and we don’t insist on doing all the work ourselves. If you or your regular accountant are able to assist us with supporting work (eg bank analysis), then this may reduce our charges.  We are happy to work with you on whatever basis is best for you, from providing only strategic advice through to taking the whole problem off your plate.

We are not embarrassed to talk about fees. Top quality professional help will always deliver benefits. If you are worried about the costs of professional advice call us for a frank discussion.

Tip 6:  Don’t leave things to the last minute

You have already missed the NDO, so don’t make things worse by procrastinating about what to do now, or by delaying dealing with HMRC if they have already written to you.  If you leave things until the last minute, you will inevitably face a more difficult problem.  So, however hard it may seem, take action now.  Once you become proactive the whole situation will be much easier to deal with.

Tip 7: Don’t be put off by lack of funds

Many people are facing a situation where untaxed money has been spent or invested in assets which have dropped in value to the point where they are not able to pay any outstanding tax liabilities.  Don’t let this put you off from making a disclosure – if you do you will only make the situation worse. The taxman may catch up with you later and the bill will then be even higher.

HMRC will usually be willing to grant time to pay or accept installment arrangements where somebody is genuinely trying to bring their tax affairs up to date.  We have considerable experience of negotiating time to pay arrangements on tax disclosure settlements, so if you are worried about whether you can pay, please give us a call.

Tip 8: Pub Talk is not always best advice

At times like this you may come across bar-stool or golf club ‘experts’ telling you how they got  away with it/got taken to the cleaners/know a man who can get you off/etc, etc. That’s OK for background information (assuming you believe what they’re telling you), but when it comes to making real decisions that affect your financial future, you need to take advice from real experts.  By all means listen to your mate, but check his advice with us afterwards.

Tip 9: What to do if your tax problem is not offshore

Not all tax problems have offshore connections.  If you have a problem that has no offshore dimension you cannot take advantage of the LDF.  However, anyone can make a voluntary disclosure to HMRC at any time.  You will always receive favourable treatment compared with someone who has not made a disclosure.

All of the general principles discussed above apply equally to all types of disclosure, so if you are worried about any kind of tax problem contact us to discuss how best to get it resolved.

Tip 10:  Take control, take action

There is nothing quite so debilitating as sitting on your hands, doing nothing except worrying about a problem and waiting for the worst to happen.  Once you have decided to take action the whole landscape will change.  You will be back in the driving seat, your mental energies will be positive, and you will be able to concentrate more on the things you do well which earn your living.

Sorry if this sounds a bit ‘preachy’, but we know from experience with hundreds of clients that the stress and distraction of a tax investigation is something that has to be experienced to be believed.  And the stress of worrying about a letter from the taxman that might arrive in the future is not far behind – sometimes it’s worse.  Either way, if you have a tax problem the best advice is always to get on the front foot and get it sorted.  If you are not sure whether you have a problem then have a review and find out the truth.  Do you want to spend your time not knowing?  Where does that leave your plans for the future?

Even if you are not the worrying type, it is in your financial interest to deal with any tax problem whilst there are advantageous terms to be had.

Without exception, our clients feel better for having dealt with the problem.

Call us for a free discussion now on 0845 643 5450 or click here to contact us.