Policy
Response
BSA response to HMRC's consultation, "Modernising powers, deterrents and safeguards: tackling offshore tax evasion"
|
Contact: Andrea Jeffries Date: 3 Mar 2010 |
Print page | Email |
Introduction
The Building Societies Association represents mutual lenders and deposit takers in the UK including all 52 UK building societies. Mutual lenders and deposit takers have total assets of over £390 billion and, together with their subsidiaries, hold residential mortgages of almost £260 billion, 21% of the total outstanding in the UK. They hold over £250 billion of retail deposits, accounting for just under 23% of all such deposits in the UK. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
Context
Our comments are brief and concerned mainly on the proposed requirement for individual customers to notify HMRC of their offshore accounts. We note in chapter 4.3 that accounts in jurisdictions which have adequate arrangements for exchange of information will be exempt from the notification requirement. All the offshore operations operated by building societies belong to “Group A” so fall into this category.
We nonetheless have a few suggestions that might improve implementation of the proposals.
HMRC's consultation, "Modernising powers, deterrents and safeguards: tackling offshore tax evasion"
Summary
We wish to stress at the outset that our members want to act in a responsible manner in all their operations, not just tax. They have no interest in shielding any customer seeking to evade his or her tax obligations. But this does not mean that our members can monitor, or judge, their customers’ tax affairs. Building societies – like banks - are therefore not in a position to provide such information to HMRC.
We therefore welcome the aim of these proposals to place in future the onus of compliance on the customer. But we agree with the British Bankers’ Association’s request that any compliance must be fair and signalled clearly to customers. This is particularly true of those accounts that need to be disclosed and those that do not.
Questions
Chapter 3 - a robust penalty framework for offshore non-compliance
1. Is this a reasonable approach to defining offshore non-compliance, or are there other categories of behaviour that should be included in the definition?
We agree with this approach. As the BBA has said, we wish to see the definition based on facts, rather than behaviours or imputed intentions, to remove all subjectivity.
2. Do respondents agree that the new penalty should apply to all taxes?
We agree it should apply to all taxes but suggest some form of gradation is applied. For example, penalties on taxes attributable to countries in Group A should attract a lower rate as a result of information exchange.
To help reduce non-payment of tax on offshore accounts, we suggest an education campaign for taxpayers. They need to know what their responsibilities are for each of their accounts. It is therefore important to address the education angle. A good start would be to provide a list of countries and territories and the reporting requirements attached to them, past and present. This should be available not only on the HMRC website, but also in paper form. Many customers prefer hard copies.
We agree that there is an education role of sorts for financial institutions but it will be different for each one and possibly for each account type. It is worth remembering that many customers are not familiar with tax matters. Any attempt at prescription in communication will fail; each institution must be able to decide on the most appropriate action itself, possibly for each type of account. Some institutions may consider that reminding affected customers of their tax obligations during the offshore account opening process is sufficient.
Chapter 4 - a requirement to notify overseas bank accounts
1. Should accounts held in a non-individual capacity (e.g. as a nominee, trustee, treasurer etc) fall within the scope of what is proposed?
We believe they should fall with the scope of the proposals.
2. If not, how should the tax risk associated by these accounts be addressed?
See above.
3. How should joint accounts be treated?
They should be treated in the same way as individual accounts.
4. Are there further safeguards that should be considered?
We believe the de minimis limit is too low to generate meaningful amounts of tax, compared to the costs incurred. Instead, we suggest a higher figure – over £100,000 – which will enable HMRC to identify more readily the more significant taxpayer, and make the notification exercise economically worthwhile.
5. Are these the right criteria for classifying jurisdictions?
While we understand the reasoning behind HMRC’s criteria, we do not believe it will help customers. They will simply wish to know what they have to report, and when, for each account. Others have pointed out that the classification of account-holding jurisdictions into groups will increase the burden for third parties if they are expected to become more involved in future. We share this concern.
6. Are there other criteria that could be introduced to help target the requirement on where there is the greatest tax risk?
As we suggest above, a de minimis of £100,000+ would help focus HMRC on the greatest tax risk. Further criteria risks confusing the customer and costing him/her (and possibly third parties) time and money.
7. Should other types of account fall within the scope of the notification requirement?
No. We urge HMRC to be clear to customers what sorts of accounts are notifiable, however.
8. Is 60 days a reasonable period within which to expect an account holder to make a notification?
Yes. We support the BBA’s recommendation that HMRC requests the report at a set time, such as 60 days after the end of the tax year.
9. Is this notification process the right response to the problem HMRC has identified?
We believe it is right that the responsibility for informing HMRC of the existence of offshore accounts rests with the customer. The processes the customer has to undergo, however, should be proportionate to the tax take.
As we have said before, financial institutions are not required to act as tax monitors. Anti-money laundering procedures are already in place to help them to act on suspicious transactions.
10. Are there any unintentional or unduly onerous circumstances in which a notification could be triggered?
No comment
11. Are there further safeguards that should be considered?
No comment.
12. Is this proposed penalty model a proportionate response to the problem HMRC has identified?
No comment.
13. Would any further safeguards would be appropriate for remittance basis users when implementing this policy?
No comment.
