The list identifies 4,388 people based in Britain and holding £699 million in offshore current accounts. The list is understood to contain the names of many senior figures in the City including "dozens of bankers", as well as several people who are being investigated by the police or have criminal convictions, according to the newspaper.
HMRC is understood to be going through the list to determine which account holders have already declared their accounts and to establish those who may have been evading tax.
Phil Berwick, a tax investigations expert at Pinsent Masons, the law firm behind Out-law.com stressed that people who suspect their names are on the list should seek advice immediately. "HMRC will examine the list in detail. It is almost inevitable that a number of prosecutions will follow. Individuals who have not disclosed their offshore assets can use the Liechtenstein Disclosure Facility to regularise their position and achieve immunity from prosecution for tax offences. It makes sense to be pro-active, before the inspector comes knocking." he said.
Berwick added that individuals with offshore accounts at other banks, and who have not disclosed their assets or income to HMRC should also come forward. "There have been an increasing number of whistle-blowers in recent years, and the trend may continue. HMRC pays rewards for the provision of information, and that may encourage more whistle-blowers to provide data."
In 2008 an HSBC employee sold details of those with Swiss accounts at HSBC to tax authorities. This resulted in the so-called “Lagarde list”, named after Christine Lagarde who was the then French finance minister, which included a number of British citizens. It is believed that HMRC did not pay for the HSBC Jersey list, according to the Daily Telegraph.
The Liechtenstein Disclosure Facility (LDF) enables taxpayers with UK tax irregularities connected to a bank account, investment or structure in Liechtenstein to settle their tax affairs on favourable terms. Those who do not currently have an account in Liechtenstein, but have an offshore bank account located elsewhere (including Jersey) can bring themselves within the LDF by now acquiring a bank account, or similar connection, in Liechtenstein. "The LDF is so flexible that even those with a wholly onshore problem can use the process, although they will not get the full benefits available." Berwick pointed out.
Phil Berwick warned that HMRC's investigations are likely to be handled by HMRC's Offshore Co-ordination Unit. "Account-holders may be invited to use the LDF by HMRC but that cannot be guaranteed. HMRC may start some investigations using their criminal or civil fraud powers, which would mean a taxpayer cannot use the advantageous LDF route. If HMRC uses their criminal powers, the first the account-holder will hear of it is when HMRC arrive at their home early in the morning to arrest them."
Holding an offshore bank account is not illegal and can be used for legitimate tax planning, especially for non-domiciled individuals. However, taxpayers are obliged to disclose funds in offshore accounts that are subject to UK tax.
Back in 2007, after HMRC received other information about those with offshore accounts, it launched the Offshore Disclosure Facility, giving those with offshore accounts the opportunity for a limited period to come forward and settle their tax affairs. There was then a further disclosure opportunity (the New Disclosure Opportunity) which ran to March 2010.
Between them these disclosure opportunities raised over £485 million. HMRC figures show that the New Disclosure Opportunity resulted in 15 individual payments over £500,000, four of which were in excess of £1 million. HMRC estimates that the LDF will bring in over £3 billion by 2016.
Phil Berwick said that "taxpayers who have held their offshore accounts for several years, and could have used the Offshore Disclosure Facility or the New Disclosure Opportunity, will be at increased risk of prosecution. It is imperative to approach HMRC before they approach you. Before approaching HMRC, however, account-holders should take professional advice to establish their options".
"Account-holders who have concerns should consider approaching a law firm, rather than a firm of accountants or tax advisers, for assistance as legal professional privilege will apply." Berwick added.
Legal professional privilege can protect from disclosure to HMRC some confidential communications between a lawyer and a client concerning legal advice about their tax affairs. In 2010 the Court of Appeal ruled in a case concerning Prudential, the insurance company, that legal privilege did not extend to advice provided by accountants .This week the Supreme Court has been hearing the appeal by Prudential against this decision.