Offshore Banking and Taxes - UK citizen

[Lithium]

Hey,

Just had a quick question as I discussed this with a friend but need some advice from anyone who has knowledge on this issue.

I am a UK citizen living in the UK, if I were to open an offshore/overseas bank account in another country and also have a debit card linked to that offshore account and use that debit card internationally/in any other country for expenses and spending, what/are there any taxes on that money?

[Jujune]

http://www.hmrc.gov.uk/offshoreaccounts/index.htm

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.

***Find out what taxes to pay on your offshore account

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.

[Tamarind]

HMRC actually, did not use legal powers. It has purchased (for a few millions) a CD from a rouge Luxemburg ex-bank worker, whih hundreds of names of Biritsh rich people who had hidden accounts in Lux. Germany has done the same.

Then it started blackmailing them with either pay some tax or you will get punished.

[SUVE]

Originally Posted by Tamarind

HMRC actually, did not use legal powers. It has purchased (for a few millions) a CD from a rouge Luxemburg ex-bank worker, whih hundreds of names of Biritsh rich people who had hidden accounts in Lux. Germany has done the same.

Then it started blackmailing them with either pay some tax or you will get punished.

Tamarind, you are actually correct on this, that is my understanding of the situation as well & reported in the financial press in the UK. HMRC do NOT have a legal power to see offshore accounts at this moment in time, they rely on fear/ignorance to get compliance & offering 'bribes'/rewards of upto £100 000 - £200 000 to get an insider to leak information, they have actually succeeded in this respect on at least one occasion.

[Tamarind]

They offered tax breaks to those on the list, i.e pay not so much as usually they would pay on taxes, keep quiet and from now on after you paid, you can keep it. Many have done from fear of beeing made public, so the sources say.

[Jujune]

Under U.K. legislation, s.20 of the Taxes Management Act 1970 permits HMRC to require any person to make available to them "such documents as are in his possession and power and contain or may contain information relevant to any tax liability which the taxpayer is or may have been subject to". This is a very wide ranging power and can be used against persons other than the target taxpayer, for example, banks and financial institutions. With this is mind there are safeguards to ensure legitimate use. Firstly, a notice can only be given with the approval of the General or Special Commissioner and, secondly, the Commissioner should only consent if he is satisfied that the use of s.20 is justifiable taking into account the circumstances of the case.

Usually a notice will contain a taxpayer's name although a notice can be given to a class of taxpayers where there are reasonable grounds to believe that taxable income has not been disclosed and the requested information is not available from another source.

The European Union has also aided the HMRC’s ability to obtain information on offshore accounts by the introduction of the Savings Directive which came into force in 2003. This Directive requires Member States to exchange information on interest income paid on non-resident accounts. The usefulness of this Directive is debatable; some have argued that it has simply persuaded people to set up offshore accounts outside the geographical area of this Directive.

However, since the introduction of the Savings Directive the HMRC have taken a harder stance on offshore tax evasion and this seems evident from a number of cases where the HMRC have used their statutory power under s.20 (8A) to have notices issued.

In one, an investment bank acted as a broker in share transactions effected for a company incorporated in the British Virgin Islands. The s.20 notice to the bank was obtained on the grounds that the ultimate beneficiaries of the transaction were U.K. taxpayers and income from these transactions had not been declared.

Another case investigated credit cards that were registered with a UK address but linked to an offshore bank account. Under the s.20 notice, HMRC gained access to the offshore bank accounts and initially estimated that around £347 million would be collected on undeclared interest and untaxed profits and gains that funded these accounts. The financial institution was given 60 days to provide 6 years' information.

2009: This year, HM Revenue & Customs (HMRC) applied to the UK's First Tier Tax Tribunal, established in April 2009, for the right to issue notices to 308 financial institutions, in order to obtain details of customers and clients
with UK addresses who hold accounts outside of the UK. The power to do so comes under the Finance Act 2008, which replicates those powers that were formerly available under s20(8A) of the Taxes Management Act 1970.
* It is important to note that, if the relevant information is held outside of the UK by an offshore subsidiary, it may be outside of the UK parent company's possession or power and thus outside the scope of HMRC's Notices.

[Tamarind]

Great information. That's why having chosen a decent offshore jurisdiction which is bound by it's countries laws, no one in UK will have to know it's existence. Even if they do suspect that you have an account somewhere, HMRC will need a criminal court order of a higher order to make the offshore bank make a move on you.

And many countries do not consider tax evasion a crime, chief among them Switzerland, who openly assist not merely legal tax avoidance but also the deliberate concealment of wealth for the purpose of evading tax - something regarded as a crime all over the developed world. Swiss authorities have boycotted and even sabotaged efforts to stop this drain of taxable cash.
The German finance minister last year called for Switzerland to be officially named and shamed as an unco-operative tax haven.

That's why that CD helped both UK & Germany squeeze some money from rich people, and scare others to declare at least the smaller accounts.

[SUVE]

Thank you to both Jujune & Tamarind for your insight & knowledge on this !

[Lithium]

OK, Thanks for the info guys.

So what do you suggest I do?

Any recommendations for good offshore banks which allow opening from the U.K, a linked debit card and also online banking?

[Jujune]

HSBC Hong Kong
Banks in Mauritius, Belize, Panama