MUCH has been written about tax avoidance and tax evasion, with the former being accepted as tax planning and the latter being deemed illegal, but the boundaries between the two are becoming ever more blurred as tax authorities around the globe go in search of unpaid tax to collect.
In the last edition of the Olive Press, the front-page article highlighted the 4,000 or so names that have allegedly been provided by a whistleblower at HSBC to HMRC in relation to Jersey account holders.
HMRC must have thought Christmas had come early and as I understand it, bosses are busily comparing data from the list with what individuals have already declared, enabling them to pick up discrepancies and more to the point, non disclosure.
This is not the first time of course that such information has been ‘leaked’ with an ex HSBC employee selling similar data about Swiss bank accounts to the authorities in 2008.
We have seen the establishment of the Lichtenstein Disclosure Facility enabling UK taxpayers with a Lichtenstein account to be able to settle tax irregularities favorably which in itself is expecting to result in something like £3 billion being recovered by 2016.
With numbers this large, is it any wonder that tax authorities are sharing information and doing all they can to identify undisclosed interest that has been earned on offshore accounts.
But the most incredulous question is why oh why do so many people hold so much money on deposit anyway; regardless of whether it is offshore or not, it could do so very much better!
Putting it simply, if you were given the choice of either paying between 20% and 50% tax on the interest you earn on your capital, whether you spend it or not, or alternatively, paying no tax; I suspect you would not take too long to come up with the right answer.
While I accept that everyone should retain some access to cash on deposit, it makes absolutely no sense at all to hold vast sums in this way and even less sense to try to hide it from the taxman when there are tried and tested alternatives available which do not push the boundaries and have been in existence for over 30 years.
They are internationally recognized by most tax authorities as legitimate investment structures, with relevant gains being declared at the appropriate time but enabling tax to be deferred until final encashment.
This is neither tax avoidance or tax evasion but sensible tax planning.
And if you are thinking these solutions are only for the mega rich or those prepared to take high risks then think again – the entry levels for this type of investment can be as low as €25,000 with a wide choice of investment strategies.
Structured in the right way, you can choose what tax you pay and when you pay it; oh and by the way, you can sleep at night too without the worry that your name might turn up on a whistleblowers list!
Richard Alexander Financial Planning Limited is an appointed representative of L J Financial Planning Limited, which is authorised and regulated by the Financial Services Authority in the UK.
Contact him at Richard@ra-fp.com