Mark Field, the Tory MP for the Cities of London and Westminster, has called on the coalition to stop more regulation on tax havens.

Field claims tax havens are an economic benefit and the debate surrounding them is one-sided. The TUC has estimated that HMRC losses £25 billion through corporate tax avoidance; an estimate Field says is way too high.

He went on to explain that Britain has constitutional relationships with 30 financial centres offshore and it is paramount that any new regulations are appropriate. The Crown Dependencies between them provided $332.5 billion net financing to UK banks in the second quarter of 2009 alone.

Tax havens lead the race to attract global capital and in fact a recent report by ActionAid claimed that ninety-eight of the UK’s FTSE 100 companies have set up subsidiaries in tax havens.

The banking sector in particular is a large user of tax havens. Between them, Barclays, HSBC, Lloyds and RBS own 1,649 tax haven companies. Barclays for example has 174 companies based in the Cayman Islands. Jersey has also proved to be a highly popular place to set up a subsidiary.

Meanwhile, the CIoT says all taxpayers should be able to take advantage of initiatives to get their tax affairs in order.

The Institute said schemes offering taxpayers reduced penalties if they own up to previously undeclared tax liabilities should be extended to cover more occupations. So far, disclosure schemes have been offered to medics, plumbers and most recently, tutors and coaches.

John Whiting, the CIoT’s tax policy director, said there’s a lot of benefit to be gained from HMRC’s offshore initiatives, because they encourage people to sort out their tax affairs. But, rather than just allowing certain sectors that opportunity, a cover-all initiative should be open to all.

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A South African has been sent to jail after being found guilty of a £1 million self-assessment income tax fraud.

HMRC discovered that Lawrence Goldberg used virtual offices to register in excess of 50 companies throughout the UK. The companies posed as nominated tax agents and through them, Goldberg sent the Revenue more than 2,000 fraudulent tax returns. As well as using the identities of innocent people, he invented people and used their details on the returns.

When his operation was at its peak, Goldberg was sending HMRC about 500 false returns a week. Most of the fraudulent returns were discovered and not processed, but Goldberg did successfully claim more than £1 million which he deposited in offshore bank accounts.

Goldberg originally conducted his operations from London, but after a brief stay in Portugal he went on the run to South Africa. He pleaded guilty to the charges against him and was jailed for two years.

HMRC’s assistant director of criminal investigation, John Pointing, said this was a huge scale fraud against public funds and the Revenue will not sit back while criminals such as Goldberg steal honest taxpayers’ money.

Meanwhile, HMRC has warned taxpayers to be vigilant if they receive emails saying they are due a tax refund.

According to the Revenue, there has been a 300% increase in ‘phishing’ emails over the past 12 months. These generally provide a link to a replica HMRC website where recipients are asked to provide details of their debit or credit card. Criminals then use the information for identity and financial theft.

Last month, HMRC received reports of nearly 24,000 of these fraudulent emails and it is helping to close down about 100 fake websites every month.

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HMRC expects to see its revenue levels boosted by £2bn in the next four years after more taxpayers than expected voluntarily disclosed assets they have hidden in Lichtenstein.

The Permanent Secretary for Tax at the Revenue, Dave Hartnett, revealed that the LDF is expected to achieve three times the revenue originally predicted. The Lichtenstein Disclosure Facility enables taxpayers to disclose details of any undeclared assets in the principality and in return they are charged a reduced penalty on unpaid tax liabilities.

Since the LDF began in September 2009, 1,200 taxpayers have declared hidden assets. The scheme will continue until the end of March 2015, which gives plenty of time for many more taxpayers to make a disclosure about their tax evasion.

HMRC had originally expected to rake in £1bn from the LDF initiative, but due to the amount of disclosures that have already been made, it has revised its projection to £3bn.

The government is also about to begin talks with the government of Switzerland in order to agree a withholding tax which would be levied on British citizens who have income hidden in Swiss bank accounts. The withholding tax would mean Britons would need to pay tax on any interest they earn from bank accounts in Switzerland. Swiss banks would be responsible for collecting the tax and forwarding the money to HMRC. As yet we do not know the rate of the withholding tax but it is likely to be between 25% and 35%.

The government hopes to reach an agreement in principle on the scheme by April and experts claim it would net the Treasury between £3bn and £6bn within 2 years.

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HMRC tax amnesties are not as effective as it would have hoped according to some tax advisers who think the Revenue should take a more constructive approach to the problem of tax evasion.

They think that holders of offshore bank accounts could be calling the taxman’s bluff and standing firm rather than coming forward and making voluntary declarations.

The Revenue had hoped that the tax amnesties would entice people to own up to previously undeclared liabilities but only about 2,000 have come forward out of the tens of thousands who are believed to have undisclosed income. The Tax Health Plan was aimed at over 28,000 doctors but so far only 1,500 have come forward. And only 419 people have come forward under the Lichtenstein Disclosure Facility which aims to spotlight holders of undeclared offshore accounts, even though HMRC has obtained client offshore bank account details from 308 banks.

New legislation comes into force in Lichtenstein next month which means that banks and financial advisers in the principality have 3 months to inform any client that they suspect may have undeclared taxable income that it must be disclosed.

HMRC has fought back against claims that the amnesties aren’t working and says it will stick to its guns and encourage people to make voluntary disclosures. The Revenue has however confirmed that those people who do not, may be subject to criminal prosecutions.

HMRC said they are pleased with the results of the Tax Health Plan which revealed £9m in undeclared income and reminded the sceptics that the LDF runs until 2015 and since March the number of people coming forward under the scheme has increased significantly.

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HMRC’s crack down on tax evasion with offshore accounts in Liechtenstein is gathering steam. The Revenue is sending letters to UK taxpayers who have accounts in the principality reminding them that they need to comply with UK tax law.

In August last year, the Liechtenstein government and HMRC signed an agreement that set out a new set of rules that come into force this September. Everyone with a bank account in the principality will have to undergo a mandatory tax audit and anyone who has outstanding UK tax liabilities will have the opportunity to volunteer details of their deposits and just receive a 10% penalty for the tax they have evaded in the last decade.

However, this deal is not only for people with assets or accounts in Liechtenstein. UK taxpayers with bank accounts in other countries may also take advantage of the Liechtenstein Disclosure Facility as long as they meet the qualifying criteria and open a bank account in the principality.

There are concerns that taxpayers who have offshore accounts that are not in Liechtenstein will not appreciate that they can also take advantage of this tax amnesty. A tax investigations partner from the law firm McGrigors said that it is only banks and trust companies in Liechtenstein that are obliged to contact their customers and therefore the thousands of taxpayers who hold business bank accounts in other countries will not be aware of this tax amnesty.

The LDF runs until March 2015 and taxpayers who fail to make a disclosure are likely to have to pay a lot more tax and resulting penalties. They also face having their bank accounts closed.

Prince Maximillian, the Crown Prince of Liechtenstein, said that this new arrangement means the risk of using offshore bank accounts as a tax haven is now extremely high.

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In his Pre Budget Report last week, the Chancellor outlined further plans to clamp down on individuals who utilise offshore bank accounts in an attempt to bypass the UK tax system.

Following a low take up of HMRC’s New Disclosure Opportunity (NDO), where those sheltering tax in offshore holdings are encouraged to declare these to HMRC, the government is now set to introduce a hefty 200% penalty for non disclosure.

It has been estimated that up to 100,000 people hold assets (such as cash and property) in offshore accounts yet as little as 10 per cent have actually come forward under NDO.

With government coffers at an all time low, most contractor accountants think that it’s no surprise to see further action on offshore tax evasion which, according to government figures, cost them in the region of £45B per year in lost revenue.

The new deadline for NDO is 4th January 2010. Anyone making offshore declarations before this date will be subject to a 10 per cent tax penalty plus interest where applicable. Commenting on the latest campaign, a spokesperson from HMRC said that this would be the last chance for those with offshore accounts to come forward before the prospect of tough tax penalties next year.

Paul Roberts, head of tax investigations at Grant Thornton, said that: “HMRC will stop at nothing to claw back missing tax revenue to UK shores. The severity of HMRC’s pursuit should come as no surprise.”

“Such a draconian penalty relating to tax evasion existed for many years but fell away in the late 1980s. This demonstrates the resolve of HMRC to follow through its threat to punish those who have not taken advantage of both the NDO as well as the earlier Offshore Disclosure Facility.”

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