In 1998 the UK pioneered the protection of privacy. Personal data stored on computers, it said, needed to be protected from falling into the wrong hands and individuals were given rights to enforce the law. Now most OECD countries have similar protections for those resident in their country.
There are however, some situations where an organisation is permitted to withhold information – organisations which are responsible for the assessment or collection of tax are outside the scope of Data Protection!
The OECD initiative for the automatic exchange of information under the Common Standard of Reporting, however takes a diametrically opposed view when it comes to assessing and collecting tax. This initiative applies to all financial institutions which have financial accounts belonging to an individual who is resident in another country.
Idris is a non UK domiciled person resident in the UK who has a bank account in Switzerland. Under the CRS rules the bank will need to report to the Swiss authorities that Idris has an account in Switzerland, the amount in the bank account and any transactions made during the year. The Swiss authorities will then automatically exchange this information with the UK authorities which can then match it up with what they know about Idris and undertake such investigations as it considers necessary.
Let’s assume that the information stored by the bank in Switzerland was collected for money laundering purposes, not for the purpose of exchange of information. This is not only permitted under the CRS but is encouraged. However, the purpose of collecting information for anti-money laundering purposes is very different from the information which may be required by the taxing authorities. Let’s assume that at Idris’s bank, the source of funds is stated as being income from a mining operation in Africa. However, in fact it is from the sale of a mining business in Africa, which was sold before Idris became resident in the UK.
Let’s assume, after a full investigation costing Idris over £400,000 HMRC is satisfied that Idris is not liable to tax. Under the Taxpayer’s Charter however, he has no right of appeal and no right of compensation.
GFOS is pioneering this research and is in daily contact with representatives from across the globe exploring what can be done by those concerned about protecting their privacy.
If you would like to book an appointment with Caroline or one of her team on what options you may have to protect your privacy, which does not impact on your investment flexibility, increase your tax exposure or impact on your security, call Svetlana on 020 3740 7423 or email email@example.com.