Holiday home owners face tax penalties over foreign bank accounts

Published 16th Aug 2009

More than one million people face swingeing penalties in a crackdown on offshore and other foreign earnings from this weekend. They may have to repay 100 per cent of the tax owed.

People with holiday homes who run a foreign bank account to pay bills are in particular danger, leading accountants have warned. Even if the account pays only modest interest, it should be declared.

The same is true of accounts holding money for visits home for those who have settled in Britain.

The Revenue has the power to demand details, through the main UK clearing banks, of offshore bank accounts held by British taxpayers. But last week the courts expanded its right to such information, agreeing that it could also force more than 300 other banks with British operations to hand over such details.

'Many British people with holiday homes abroad will have a foreign bank account to help run the property,' said Dawn Register, senior tax manager with accountant BDO Stoy Hayward.

'If this account earns interest and has not been declared to the Revenue, they need to seek advice about making a disclosure.'

With the Government's debts spiralling, efforts are being made to pull in tax revenue. The demand for information from banks is coupled with an incentive for people to come forward between September 1 and November 30.

Those who do so will see the penalty levied capped at ten per cent of the money owed. Those who do not come forward and are later identified through the bank disclosures face penalties of up to 100 per cent.

Owners of foreign holiday homes, estimated at between 500,000 and one million people, may be unaware that they need to declare interest.

Mike Warburton, tax partner at accountant Grant Thornton, identified-another group at risk.

'People whose roots are in the Indian subcontinent or the Far East often have a share in a family-owned rental property or farm, with payments made to a local bank account and the money used to meet the costs of visits to the old country,' he said. 'That must be declared.'

Britain also last week signed a deal with Liechtenstein under which the tiny Alpine tax haven will supply details of UK taxpayers' accounts. Because its banks are not covered by the disclosure regime, Britain agreed to give account holders until 2015 to come clean, as opposed to just four months for those with accounts anywhere else.

'It seems grossly unfair,' said Warren Hyams, director with tax investigation specialist WLH. 'Someone with an account elsewhere may well challenge this in the European Court of Human Rights.'

The Revenue said the Liechtenstein deal was a cost-effective way of collecting tax.

Source: ' Mail on Sunday '

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