Revenue & Customs has so far collected just £13.9m from an initiative to prise open secret bank accounts in the Crown Dependencies which was originally expected to end up raising £1bn.
Just over 400 people have so far come forward to own up to previously undeclared accounts in the Isle of Man, Jersey and Guernsey, according to data published by HMRC. They used a ‘disclosure facility’ that offered reduced penalties to former tax evaders which the Treasury originally forecast would collect £320m by this stage.
Fiona Fernie of Pinsent Masons, a law firm, said HMRC would be disappointed by the figures: “Yields from the Crown Dependency disclosure facilities are much lower than HMRC had hoped for.”
She said that taxpayers with large amounts of unpaid tax were likely to be making use of another tax amnesty, known as the Liechtenstein disclosure facility (LDF), which offered better terms and immunity from prosecution. The LDF had raised just under £1.1bn from 5819 disclosures by the end of March.
HMRC said: “We are aware that some taxpayers with assets in the Crown Dependencies are coming forward via other routes, most notably the Liechtenstein disclosure facility.”
Ms Fernie said another possible explanation of the low yield was that the scale of tax evasion across the Crown Dependencies was not as extensive as many assumed. She said: “There is likely to be some non-compliance, but more often than not it will be technical in nature — or based on simple mistakes rather than non-legitimate structures.”
She warned anyone who had an undisclosed account to come forward quickly, rather than wait until they are discovered when it would be too late to use the disclosure facilities. HMRC is expected to step up its compliance activity sharply once it starts receiving data from September 2016.
Just 37 disclosures yielding £2.6m were made by Guernsey account holders, while the remainder was fairly evenly split between the Isle of Man and Jersey.
The disclosure facilities were launched at the same time that the Crown Dependencies agreed to hand over tax information relating to UK residents from September 2016. The disclosure facilities were originally scheduled to close on the same date, although their closure has since been brought forward to December 2015.
In 2013, the Treasury estimated the deal, part of what the chancellor called “one of the largest ever packages of tax avoidance and evasion measures”, would result in an extra £1bn of tax being raised over five years. “These agreements will significantly increase the amount of information on potentially taxable income that is automatically exchanged, in order to further clamp down on tax evasion,” it said.
At the time, the Office for Budget Responsibility said the estimate involved “particular uncertainty” as there was little hard information about the value of UK individuals’ financial assets in these Crown Dependencies, which was estimated to total £8.5bn. There was also uncertainty around how individuals affected will respond to the policy.
An agreement with Switzerland aimed at collecting tax from undeclared accounts also collected far less than originally expected.
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