The British and American governments signed an agreement this week to “improve international tax compliance” and implement the Foreign Account Tax Compliance Act (FATCA): in one of the latest developments in the internationally concerted effort to crackdown globally on tax evasion using offshore bank accounts.
The US Treasury has recently issued final “bank deposit interest” regulations which will substantially increase the amount of information the US government collects. The Americans are now committed by this agreement to sharing this intelligence with the UK where it concerns people living in the UK. It gives another boost to HMRC’s ability to obtain information to help in tackling UK tax evasion.
David Gauke, Exchequer Secretary to the Treasury, said: “This demonstrates our commitment to working internationally to tackle tax evasion”.
The United States of America has not historically been a popular place for UK residents to hold offshore bank accounts. However, the number of UK citizens holding accounts in the US has increased in recent years due to a number of factors. With concerns about the global economy some people in the UK have decided to diversify by opening bank accounts in a number of jurisdictions, including the US. More typically a large number of UK citizens work on secondments and short-term assignments in the US – particularly in the financial services sector. Those people employed by American financial institutions will often find themselves encouraged to open a bank account in the USA for the convenience of their employers. As well as this, increasingly UK residents are taking holidays in the USA. Only a small number of holidaymakers will bother opening a US dollar account there. However, a small but significant number of Brits have also acquired holiday homes and timeshares in America; particularly in Florida. Most of those will have opened a bank account in America.
These measures are clearly aimed at people with substantial amounts of undeclared investment income. However, even people with a small amount of deposit interest will find themselves being reported on. Failure to declare that interest in their tax returns could lead to a full-blown tax investigation in the UK.
What does this mean for me?
If you have a financial institution account in the USA which has accrued income or capital gains, and you have not reported it on your UK tax return, then HMRC may discover that from this new information source. If this source of income extends back a number of years you should make a disclosure of this to the UK tax authorities. A voluntary disclosure will ensure that HMRC do not commence a criminal investigation, and will also substantially reduce the amount of tax geared penalties that the taxman will seek. There are currently a number of favourable ways to make tax disclosures in the UK. The current tax amnesty, the Liechtenstein Disclosure Facility, is open to most UK residents: even though they don’t currently hold bank accounts with Liechtenstein. This offers extremely favourable terms to settle historic liabilities with the taxman.
Worried about an offshore bank account?
Lynam Tax Enquiry Experts have substantial experience of the key issues. We are helping many clients and their agents with the current tax amnesty.
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