The Prime Minister, David Cameron, has published his tax returns for the past six years in the wake a massive leak of financial documents – the so-called “Panama Papers” – from Panamanian law firm Mossack Fonseca, one of the world’s most secretive companies based in the Central American tax haven.
The move came following revelations that Mr Cameron may have benefited from an overseas tax-avoidance scheme set up by his late father, Ian, in the Eighties. Amid allegations of a tax “witch hunt”, other senior political figures have felt compelled to follow suit and published their own recent tax information, including the Chancellor of the Exchequer, George Osborne, the Leader of the Opposition, Jeremy Corbyn, and the Mayor of London, Boris Johnson.
This is thought to be the biggest leak yet of financial data and has exposed potential criminal activity much of which involves the rich and famous as well as powerful public figures. The leaked documents reveals attempts of individuals, corporations and other entities to hide their wealth from the tax jurisdictions they should be reporting it to by using Panama as a tax haven.
The story broke in April of this year after a German newspaper obtained 11.5 million documents and shared these with the International Consortium of Investigative Journalists (ICIJ). During the course of approximately one year, the ICIJ worked with journalists all over the world, including the UK newspaper The Guardian, to analyse the documents. The source of the leak is currently unknown.
Tax havens and bearer shares – tax evasion and avoidance
The Panama Papers suggest that the use of tax havens was predominately for the purpose of tax evasion (constituting money laundering) or tax avoidance and in some cases to avoid internationally imposed sanctions.
The documents also uncover fake ownership arrangements often using bearer shares and shell companies. The UK legislated against these when amendments to the Companies Act 2006 were implemented with effect from 26 May 2015. This move was part of the UK government’s aim of promoting transparency of company ownership and control with a view to preventing criminal use of UK corporate entities. Hiding money from authorities is in direct breach of international regulations designed to stop money laundering and tax evasion.
HMRC enquiries and investigations
HMRC will look closely at any UK-based individuals or those with a UK presence (who, therefore, also have UK tax affairs and obligations) who are named in the leaked documents. Anyone who has been involved in tax evasion through Panamanian structures would be well advised to seek specialist advice immediately.
If a disclosure of tax irregularities needs to be made it is invariably more cost-effective to approach HMRC directly to achieve this, rather than waiting for a tax enquiry or tax investigation to be started.
Voluntary disclosures usually have a beneficial effect on the level of financial penalties that HMRC will seek to impose.
Following previous leaks, such as that suffered by HSBC Geneva, HMRC is now very experienced in this type of tax investigation. It is also adept at devising processes and initiatives aimed at recovering tax shortfalls arising from previously undeclared offshore assets.
Anyone already in receipt of correspondence from HMRC in this regard should seek professional advice immediately, as should anyone fearing a letter in due course
In a statement Jennie Granger, HMRC’s Director of Enforcement and Compliance said:
“HMRC can confirm that we have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation.
We have asked the ICIJ to share the leaked data that they have obtained with us. We will closely examine this data and will act on it swiftly and appropriately.
We have brought in more than £2 billion from offshore tax evaders since 2010 and the Government has repeatedly strengthened our powers and resources with new criminal offences and higher penalties, so we can take even tougher action against the minority who try to cheat the honest majority by hiding their money in offshore tax havens.
Our message is clear: there are no safe havens for tax evaders and no-one should be in any doubt that the days of hiding money offshore are gone…”
Increasingly, tax jurisdictions are working together to ensure that there is no longer anywhere in the world to hide wealth, and authorities, regulators and enforcement agencies have also said they have been scrutinising the leaked data and plan to carry out follow-up investigations.
This news may be of great interest to non-UK based taxpayers.
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