Offshore accounts…

Does the phrase ‘offshore bank account’ conjure up visions of millionaires, celebrities, and tax free income? The glam world of tax havens just got less glam…

What is an offshore bank account?
This is an account that is in a different country to the person depositing money in the account. The phrase was originally coined from money deposited in the Channel Islands but includes accounts in such places as Switzerland, Andorra and Luxembourg.

Does an offshore account mean tax-free savings?
Many people think that the interest received on offshore bank accounts is tax free. However, tax will be payable on the interest you earn from offshore savings unless certain conditions apply.

Is it wrong to hold an offshore account? Are these accounts a way to evade tax?
It isn’t an offence to hold an offshore account and it can be useful for people who need to transfer money between currencies. It is an offence though if these accounts are used to avoid UK tax responsibilities and if income is not declared. If you are caught using an offshore savings account to evade tax HM Revenue & Customs will collect what you owe in tax as well as charge you interest and a fine.

Are offshore accounts secret?
HM Revenue & Customs have been working on an international exchange of tax information so that they will know what income is being earned on overseas accounts. An agreement between Swiss and UK tax authorities came into operation in January 2013.

Automatic exchange agreements now exist with the Overseas Territories: Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands; and the Crown Dependencies: Jersey, Guernsey and the Isle of Man.

How do you come clean to HMRC Moneypenny?
UK taxpayers with outstanding tax liabilities have had the choice of paying a one-off charge to settle past unpaid tax or face a withholding tax on income and gains.

Many holders of accounts in Switzerland have taken advantage of the Liechtenstein Disclosure Facility (LDF), which has allowed UK tax residents with undisclosed overseas assets to become compliant by paying a limited penalty on their tax liabilities.

This facility is due to close on April 5 2016. There are also Guernsey and Jersey Disclosure Facilities, and these are open until September 30, 2016. While neither the GDF nor JDF ensures immunity from prosecution, full disclosure of tax liabilities will be very unlikely to result in a criminal investigation.

Confused? Talk to the expert
Accountancy Plus
01273 735344
www.accountancyplus.biz