HMRC analysing data showing extensive use of complex offshore structures to evade tax

HMRC said that it is still analysing the data it has obtained, which shows the use of companies and trusts in jurisdictions such as Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands. It said that it has identified over 100 people who benefit from these offshore structures and some of these people are under investigation for offshore tax evasion.

“If any individual or company has any doubts about the legitimacy of structures through which they hold assets overseas, they would be right to be spooked by this announcement,” said Phil Berwick, a tax investigations expert at Pinsent Masons, the law firm behind Out-law.com.

Berwick said that his advice for anyone holding offshore undeclared assets would be "to step forward and consider using the Liechtenstein Disclosure Facility to declare any offshore assets now if they need to, rather than waiting for HMRC to approach them first".

The Liechtenstein Disclosure Facility (LDF) is a disclosure process designed for taxpayers with UK tax irregularities connected to a bank account, investment or structure, such as a trust, foundation or company, in Liechtenstein. Individuals who do not currently have assets in Liechtenstein, may be able to bring themselves within the LDF by now acquiring a Liechtenstein bank account.

The benefit of settling tax irregularities by using the LDF is that tax, interest and a penalty will be charged, but HMRC will only seek tax for the period from 6 April 1999, rather than the normal 20 year period. There is also immunity from prosecution for tax offences under the LDF.

Jennie Granger, HMRC Commissioner and Director General for Enforcement and Compliance said that whilst some of the structures revealed "may be perfectly legitimate and may already have been declared to HMRC", others may involve "tax evasion, avoidance or other serious offences by taxpayers". "What has to stop is using offshore structures to illegally hide assets and income,” she said.

Berwick said that taxpayers are entitled to hold assets overseas, or operate offshore bank accounts, providing they make the necessary disclosures to HMRC. "A number of those on the list may not have done anything wrong, but they could still face a HMRC investigation," he said.

HMRC has also identified more than 200 UK professional advisers, such as accountants and lawyers, who advised on setting up the offshore structures as a result of the information, it said. It said that those who advise on setting up offshore structures "will also be scrutinised".

“This is a clear warning shot against accountants and other advisers that HMRC is going to come after them if they are involved in establishing offshore structures," Berwick said. “HMRC is keen to clamp down on accountants and other advisers who they feel have overstepped the mark."

HMRC has not commented on the source of the information or clarified whether any of the tax authorities paid for the information. The information is believed to include the 260 gigabytes of material leaked to the International Consortium of Investigative Journalists (ICIJ); which, in conjunction with other media organisations including The Guardian and the BBC, published a series on offshore avoidance last month. However, the information held by HMRC and the other tax authorities looks to be more substantial as HMRC said that the data they have amounts to 400 gigabytes.

The data also exposes information about individuals and companies resident in other countries that HMRC say "may be shared with other tax administrations as part of the global fight against tax evasion".

Last month the five largest European economies (G5) announced that they have agreed to a "pilot" automatic information exchange arrangement, intended to help them tackle tax evasion, saying that the agreement would "provide a template" for a wider multilateral agreement. The UK, France, Germany, Italy and Spain will participate in the pilot.

Last week the UK Government announced that all British Overseas Territories with significant financial centres have committed to automatically exchange information about taxpayers' financial affairs with the UK and other members of the G5.

Earlier this week, the European Commission's Tax Commissioner Algirdas Šemeta, said  that the Commission plans to strengthen the existing rules allowing for the automatic exchange of financial information between EU member states in an attempt to tackle tax evasion.