HMRC blasted over Swiss tax deal forecasts

Wednesday 30 October 2013

MPs have criticised HMRC over its “completely unrealistic” predictions of revenues to be earned from a tax evasion deal with Switzerland.

The Public Accounts Committee (PAC) has criticised early estimates from the tax authority which claimed the government could bring in an additional £3.1 billion under the deal, which compels Swiss banks to disclose the names of account holders from the UK who were not willing to pay a “withholding tax” to HMRC.

Although the scheme is intended to encourage those with “secret” bank accounts in Switzerland to come forward and pay any tax they might owe in the UK, it now appears that the government will glean just a fraction of the revenue it had projected. Just £440 million has been recovered so far, on top of a £342 million one-off payment from Switzerland to the UK, and it is likely HMRC’s calculations will have to be revised downwards in next month’s Autumn Statement.

In a lengthy committee session where tax officials were grilled by PAC, HMRC said it had so far received the names of as many as 80,000 individuals who hold Swiss bank accounts. Letters are being sent to those who have been named and some 600 people have already contacted the authority to settle their tax bills.

Ed Troup, HMRC’s tax assurance commissioner, explained that this revenue could not have been brought in by any other means, given the famous secrecy of Switzerland’s banking system. However, MPs also criticised HMRC’s tendency to settle rather than prosecute in high-profile tax evasion cases: indeed, PAC chair Margaret Hodge referred to the authority’s prosecution record in offshore evasion cases as “laughable”.

The news comes at a time when HMRC’s tougher stance on tax evasion and avoidance is being keenly felt by contractors and other small businesses. Figures obtained by UHY Hacker Young earlier this month indicated that investigations into the personal tax returns of individuals brought in an extra £609 million last financial year. According to the Financial Times, Hacker Young said that much of the surprising 38 per cent jump from the previous year was down to extra scrutiny of Self Assessment returns - the kind completed by self-employed professionals across the UK.

Switzerland is not the only jurisdiction with which HMRC has struck a tax deal. In its bid to hunt down undeclared assets being held offshore, it has made agreements with all the UK’s own Crown Dependency and Overseas Territories from the Cayman Islands to the Isle of Man. Just last week (October 22nd), the UK finally signed a similar deal with Jersey and Guernsey.

On top of these, a series of tax disclosure facilities have been set up for individuals with accounts in these offshore locations. Contractors and other taxpayers who have assets held abroad can use these facilities to settle their liabilities with HMRC on the best possible terms, rather than receiving the hefty fines and interest that can be charged after an investigation.

By Victoria McDonnell

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