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A matter of trust: the taxman adds byte to offshore crackdown
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Attempts by HMRC to track down and penalise those engaged in tax evasion continues apace.
Fresh from the introduction last month of the General Anti-Avoidance Rule (GAAR), the Revenue has announced that offshore trusts have become its latest target.
It has taken the wraps off a data-driven attempt to locate those individuals who it believes have placed their cash in overseas trusts to hide the true scale of their income and wealth.
The Chancellor of the Exchequer, George Osborne, has already issued what the HMRC describes as “tax cheats“ with a fairly stark warning: “We’re coming to get you”.
Deals have been struck with US and Australian tax authorities allowing them to share data on any of their citizens using trusts in such places as the British Virgin Islands, Singapore or the Cook Islands to shelter their money.
Of course, it’s important to remember that not all those who have offshore trusts are deliberately trying to flout HMRC’s laudable efforts to tackle criminal tax evasion.
Some people may well have set up trusts many years ago, when tax rules were more relaxed.
However, history offers no protection from the scrutiny of and possible penalties from the taxman.
Broadly speaking, individuals who have either set up or are beneficiaries of offshore trusts may be liable to pay UK income tax or Capital Gains Tax by reference to income or gains made by the Trustees in the past, even if they do not bring funds into the UK or enjoy any benefit from the trust in the UK.
Tax liability depends upon a person’s residence and domicile status for UK tax purposes. It is, therefore, vital that anyone with any sort of interest in an offshore structure takes advice so that they understand their liability to UK tax and can assess whether any action, such as reports to HMRC or bringing the assets back onshore, may be appropriate.
Failing to do otherwise runs the risk of more than a stern ticking off from the man in in Number 11 Downing Street. Penalties of up to 200 per cent of the outstanding tax and criminal prosecution are very real threats.
If you require guidance about offshore trusts or need expert help to manage your assets while staying on the right side of the taxman, contact the Will's, Trusts and Probate team at Pannone via our website or by phoning 0161 909 4921.
0800 840 4929