Tax avoidance scheme of the week

This week we highlight reports of the latest turn of events of a non-UK tax scheme as the amounts involved are just so huge. The scheme involves Switzerland's No. 1 private bank, UBS, which, in February agreed to pay $780m (£547m) to the US authorities to avoid a criminal prosecution for helping thousands of wealthy Americans avoid tax by hiding their money in secret bank accounts.

SwissInfo today contains a report titled: Spotlight falls on shadier tax evasion scams.

"The murky and sophisticated world of tax avoidance has been glimpsed in the details of a treaty to turn over UBS bank clients to the United States authorities."

In the summer, UBS agreed to reveal the names of thousands of UBS's rich U.S. clients to Washington to settle the tax-avoidance dispute. The request for such information was first reported around a year earlier in the New York Times: U.S. seeks client names in UBS tax evasion case.

Under US law, Americans are supposed to declare all foreign bank accounts containing more than $10,000. According to prosecutors, some 20,000 Americans had private accounts at UBS containing $20bn between 2002 and 2007. Some 17,000 of these accounts were concealed from the tax authorities.

So the scheme here was clearly more in the way of fraud in that taxable income was not being disclosed.

SwissInfo reports that:

UBS clients who used sham shell companies, disposable mobile telephones and credit cards to funnel cash into Switzerland will also come under the scrutiny of the Internal Revenue Service (IRS).

The Swiss government agreed a deal with the US authorities in August to hand over the names of 4,450 UBS clients following a confession from the bank that some staff had actively helped US citizens evade taxes.

Details of which names would be disclosed were kept under wraps until the end of a recent US tax amnesty.

A prime example, covered by the treaty, would be indirect ownership of accounts. In other words, clients who hid their identity behind overseas trusts, corporations or foundations – sometimes fronted by third parties – that sifted assets into Swiss bank accounts.

A US lawyer is reported to have warned that:

"even the most sophisticated methods of disguising identities and salting away undeclared cash could prove paper thin given the level of cooperation between the Swiss and US authorities."

"All codes are breakable and recent events [such as the UBS investigation and the Swiss-US disclosure deal] have shown that these holding agencies are extremely vulnerable," he said.

In the UK there is no exemption for any foreign bank accounts. Indeed HMRC's current New Disclosure Opportunity is intended to provide a final opportunity for any UK residents to tell the taxman about previously hidden foreign bank accounts. The deadline for notifying HMRC of your intention to make a disclosure is 30 November.