Is­rael is the tax­man’s new best friend

The Jewish Chronicle - - FEATURES - BY CLAIRE SHELEMAY

SE­NIOR OF­FI­CIALS from HM Rev­enue & Cus­toms vis­ited Is­rael in De­cem­ber last year to re­lay their mes­sage of zero tol­er­ance to­wards off­shore tax eva­sion. They met se­nior of­fi­cials from the Is­raeli Tax Author­ity to build on an open dia­logue and to make a clear state­ment of in­tent for the two ju­ris­dic­tions to fur­ther build their re­la­tion­ship. This is rel­e­vant to Is­rael, given the up­com­ing au­to­matic exchange of bank­ing in­for­ma­tion be­tween Is­rael and the UK. Some 101 ju­ris­dic­tions have com­mit­ted to data exchange in 2017 or 2018 un­der the com­mon re­port­ing stan­dard. Is­raeli banks have warned most of their UK clients that they will be ex­chang­ing in­for­ma­tion with HMRC about bank ac­counts open as at Jan­uary 1, 2017.

The new world­wide dis­clo­sure fa­cil­ity opened on Septem­ber 5, 2016. This is a last op­por­tu­nity for tax­pay­ers with UK un­de­clared tax li­a­bil­i­ties to come for­ward vol­un­tar­ily to re­solve their tax af­fairs. The clear in­cen­tive is to dis­close now, be­fore in­for­ma­tion is ex­changed un­der the com­mon re­port­ing stan­dard. RE­QUIRE­MENT TO COR­RECT In the Fi­nance Bill 2017, HMRC leg­is­lated a new statu­tory re­quire­ment to cor­rect past tax re­turns. This en­cour­ages tax­pay­ers with off­shore fi­nan­cial in­ter­ests (in­clud­ing off­shore struc­tures and trusts) to re­view their tax af­fairs to en­sure their UK tax re­turns are com­plete and cor­rect for all tax years to April 5, 2016. Again, this is a fi­nal chance to re­solve his­tor­i­cal is­sues be­fore in­for­ma­tion is ex­changed un­der the com­mon re­port­ing stan­dard. The win­dow of op­por­tu­nity to cor­rect th­ese tax re­turns by mak­ing a full dis­clo­sure ends on Septem­ber 30, 2018.

There are tougher new penal­ties for fail­ure to cor­rect, if you have no rea­son­able ex­cuse. The penalty is 200 per cent of the tax li­a­bil­ity, which can be mit­i­gated to a min­i­mum of 100 per cent of the tax li­a­bil­ity. HMRC can also charge an ad­di­tional as­set-based penalty, cal­cu­lated at up to 10 per cent of the as­set’s value should the tax ex­ceed £25,000 in any one year. Tax­pay­ers with off­shore prop­er­ties may be hit hard by this ad­di­tional penalty. Fur­ther penal­ties can be levied if off­shore as­sets are moved be­tween ju­ris­dic­tions. WAIT-AND-SEE AP­PROACH The risks of non-dis­clo­sure and the wait-and-see ap­proach are higher than ever. Firstly, HMRC has tipped the scales in its favour, in re­la­tion to the like­li­hood of iden­ti­fy­ing cases for in­ves­ti­ga­tion, par­tic­u­larly fol­low­ing the im­ple­men­ta­tion of the com­mon re­port­ing stan­dard. Se­condly, HMRC has upped the ante with re­gard to the con­se­quences of not dis­clos­ing. It can open for­mal civil in­ves­ti­ga­tions which will in­evitably lead to higher penal­ties and a longer process. It may also launch criminal in­ves­ti­ga­tions with a view to pros­e­cu­tions, par­tic­u­larly when the new “strict li­a­bil­ity” of­fences come into force, as it will no longer need to prove the tax­payer in­tended not to de­clare all the tax due.

HMRC has sent a clear mes­sage that the days of any safe havens for tax evaders are num­bered. Its visit to Is­rael and re­cent leg­is­la­tion fully backs up this ob­jec­tive.

Claire Shelemay has been with BDO for more than 10 years and moved to Is­rael three years ago. Her ex­per­tise re­lates to solv­ing tax is­sues for UK res­i­dents with off­shore as­sets (in par­tic­u­lar, those re­lat­ing to Is­rael) and Is­raelis with UK as­sets, 00 44 785 490 4554/ 00 972 5 8795 3599, claire.x.shelemay@bdo.co.uk

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