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Offshore bank accounts

Do you have an offshore bank account? Should you pay tax?

If you receive savings and investment income from abroad, you will usually need to declare this on a Self Assessment (SA) tax return. You may have to pay UK Income Tax, but if you've paid foreign tax on the income you may be able to offset (deduct) this.

What information does HM Revenue & Customs (HMRC) hold?

HMRC has recently used its legal powers to obtain information about holders of offshore accounts from a number of banks.

HMRC has also obtained similar details through the European Savings Directive, which provides for the exchange of information about interest payable to residents of other countries.

For a limited period HMRC offered a facility to help offshore account holders to get their tax affairs up to date, the Offshore Disclosure Facility. This facility is now closed.

HMRC is now pursuing those with offshore accounts and tax liabilities who did not notify their intention to disclose under the scheme by 22 June 2007 as well as those who notified but decided not to disclose.

In some cases penalties could amount to 100 per cent of the tax due and in exceptional circumstances criminal investigation may be considered.

How will HMRC contact me?

HMRC is now contacting holders of offshore bank accounts who chose not to disclose under the Offshore Disclosure Facility.

Depending on the circumstances this contact may take the form of:

  • a letter and an initial form, followed, where appropriate, by the issue of a disclosure form to enable account holders with unpaid tax to bring their tax affairs up to date
  • a formal notice of enquiry
  • the issue of an SA return for the years where none has been submitted
  • in exceptional circumstances that meet the criteria within our published Criminal Investigation Policy, the undertaking of a criminal investigation

1. Tell me more about the initial form (OCG1)?

In some circumstances HMRC may choose to issue a form to ask you for more information before we consider what further action is appropriate.

If you receive a form this will be because HMRC holds information from one or more banks that indicates that you hold or have held an offshore bank account or accounts. We will use this information to verify your replies to the form. If you receive a form, even if you don’t feel that any tax is due, please complete and return it.

A Helpsheet will be included to guide you through completion of the initial form, OCG1(HS) Offshore Compliance Group - helpsheet for initial form (PDF 85K).

What action will HMRC take on receipt of the initial form?

What further action is taken will depend on the information you provide.
If you have a reason for not disclosing your account(s) we will consider the explanation you give. We will either accept your explanation, or, in certain circumstances we may challenge the explanation.

What happens if I consider I have unpaid taxes to disclose?

We want to encourage those with unpaid tax and duties to pay what they owe. If you consider you have any unpaid taxes we will send you the necessary forms for you to calculate the tax you owe.

This will include a disclosure form (OCG2) accompanied by a OCG2(HS) Offshore Compliance Group - disclosure helpsheet (PDF 91K) and OCG2(WS) Offshore Compliance Group - disclosure worksheet (PDF 71K) designed to guide you through completion of the form.

When you return this to us we will then calculate the interest and invite you to make an offer to include an amount for penalties.

Although you did not participate in the Offshore Disclosure Facility you will now have this further opportunity to put things right. Co-operation at this stage will be taken into account in determining the level of penalty to be applied. However, this is unlikely to be less than 30 per cent of the tax and duties due.

We expect the vast majority of disclosures to be accepted.

However, we may need to contact you or your tax adviser, if you have one, to clarify any points. You may have to provide appropriate evidence of your circumstances to satisfy us that your disclosure is complete.

If we cannot accept your disclosure, it is likely that we will make enquiries in the normal way.

For further information on the initial form call our dedicated telephone helpline 0845 366 7801 (international +44 125 384 6155).

2. What if I receive a formal notice of enquiry into a return?

You may receive a formal notice of enquiry. You can find more details about HMRC enquiries on the internet under Self Assessment, the legal framework and then enquiries into tax returns.

HMRC will open an SA enquiry because we hold information from one or more banks that indicates that you hold or have held an offshore bank account or accounts and we wish to enquire into the completeness and accuracy of the information provided in tax returns you have made.

If we find that your returns are incomplete and you chose not to participate in the Offshore Disclosure Facility we will take this into account in determining the level of penalty to be applied which is unlikely to be less than 30 per cent of the tax and duties due.

3. What if I receive an SA return(s)?

If you have a net tax liability you will usually need to declare this on a SA tax return.

It may be that you have never been in receipt of an SA return or have not received one for some time. If you have not been issued with a notice requiring you to complete a return you still have a statutory responsibility to notify HMRC that you are chargeable to income tax. You can find out more about your obligation to notify chargeability on the internet under SA Requirement to notify chargeability.

The information HMRC has received from the banks may indicate that your circumstances require a return(s) to be issued.

The issue of the return(s) will allow you to declare your income and for HMRC to take appropriate steps to regularise your tax position, including charging any interest and penalties due. In certain circumstances we will make enquiries into your returns in the normal way.

What if I receive no contact and wish to make a full disclosure?

HMRC encourages customers to make voluntary, unprompted disclosures. If you wish to do this, you should contact your own tax office.

Details of local offices can be found by visiting the Contact us pages.