Banks are braced for inquiries from anxious customers fearful that confidential offshore account details will be handed over to tax inspectors, as Revenue & Customs launched its partial amnesty for investors hiding money offshore.
The Revenue plans to spend £1m on a marketing campaign to persuade an estimated 50,000 people with undeclared offshore accounts to come forward.
They are being offered an incentive of reduced penalties, reinforced by the threat of exposure, after the Revenue won a legal order last month forcing more than 300 banks to hand over offshore account details.
Lawyers acting on behalf of the banks said they had been taken aback by the “blanket” nature of the disclosure notices, which give them 90 days to hand over offshore bank and investment account details going back to March 2004. It was likely to take weeks or even months before they could be sure which customer account details they would disclose.
Murray Clayson, a partner of law firm Freshfields, said some banks were likely to consider a judicial review, possibly concerning the legality of the process, to ensure they had exhausted all their options before delivering confidential customer information.
Simon Airey of DLA Piper, another law firm, said: “Institutions that are served with a notice will need to consider their position very carefully before attempting to respond.”
All information held on UK computer servers and, in some cases, in old files stored in warehouses would have to be handed over. But banks also have to consider data stored offshore, which their UK operation may have the power to access.
Robert Kirkby, technical director of Jersey Finance, said directors of banks’ Jersey subsidiaries would have a duty not to breach confidentiality, citing case law going back to 1980.
However, lawyers said many banks had been reluctant to ring-fence data to keep information out of reach of the Revenue because of reputational risks and the complexity of their computer systems. The Revenue has warned banks it would be a criminal offence to destroy any data covered by the disclosure notices.
Stephen Camm of PwC, the professional services firm, said uncertainty over the extent of banks’ disclosures was unlikely to deter individuals from coming clean. “HMRC will hope the publicity will be enough to convince people that the ground is so unstable they will come forward.”
The Revenue’s decision to spend money publicising its amnesty follows criticism that a similar initiative in 2007, which raised £450m, was insufficiently publicised. It expects to raise at least £500m from its latest initiative, which focuses on banks smaller than the high street banks targeted in 2007, though some will have much wealthier clients.
In the 2007 initiative there was unpaid tax in about a quarter of the offshore accounts the Revenue was told about by the high street banks.
However, in a recent case involving a bank with wealthier clients, the
Revenue estimated that just 5 per cent of offshore clients had evaded tax.
Get alerts on World when a new story is published