09/04/24

UK: Pandora Papers: UK taxpayers could face criminal proceedings after HMRC targets those named in documents

As published on: msn.com, Tuesday 9 April, 2024. 

MRC has begun contacting UK residents who were named in the leaked Pandora Papers, and some could potentially face criminal proceedings.

The Pandora Papers, released during 2021 and 2022, revealed that prominent and wealthy people have been legally setting up companies to secretly buy property in the UK.

Those named in the files of 14 offshore financial service providers are now being given the chance to correct their tax affairs.

The letters, which started going out this month, warn recipients to report all their overseas income or gains that they owe UK tax on or face penalties of up to 200 per cent of any tax due or prosecution.

They have within 30 days of receipt of the letters to contact HMRC if they have unpaid taxes due.
Matt Crawford, tax investigations partner at tax and advisory firm, Blick Rothenberg, said: “This is a targeted approach by HMRC to individuals who they believe pose a higher risk of having been involved in avoidance or evasion of UK tax through the use of offshore entities.”

Taxpayers who are unsure as to whether they have an undisclosed tax bill are encouraged to seek professional advice.

Recipients of these letters can make disclosures under the Disclosure Facilities made available by HMRC. If individuals aren’t clear about which facility to use, HMRC would recommend getting professional tax advice.

In cases of suspected dishonesty, one of HMRC’s disclosure facilities, the Contractual Disclosure Facility, if used correctly the taxpayer can be protected from criminal prosecution where they make a complete, open and honest disclosure of all deliberate behaviour.

The Pandora Papers were the largest ever release of financial documents, surpassing the 2016 release of the Panama Papers, with the International Consortium of Investigative Journalists releasing more than 11 million records from 14 offshore service providers.

As soon as these papers were released, HMRC began reviewing the data.

Kirsty Telford, Deputy Director for Offshore at HMRC’s Risk and Intelligence Service said: “Tax evasion is increasingly global – but, unfortunately for tax criminals, so is HMRC’s reach, accessing data and intelligence through international collaboration.

“Our message to users of these financial services is think hard and take this opportunity to be honest and pay the tax you owe, because the reputational and financial damage if you don’t can be significant and long-lasting. We are giving people a narrow window of time to do the right thing and correct their tax records, before we take action.”

Where taxpayers take no action, HMRC may take further action including using information contained in the Pandora Papers to ask specific questions regarding the tax treatment of particular transactions or income, Crawford says.

“HMRC’s initial approach has been to approach taxpayers informally; data in HMRC’s accounts show this is often an effective approach to encourage defaulters to come forward voluntarily.

“Its next step, where they have specific intelligence regarding individual taxpayers’ affairs will be to use their legal powers to compel individuals to produce documents or records which HMRC may use to conclude tax has been underpaid.”

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UK HMRC Pandora Papers