HMRC investigates the Pandora papers
HMRC have let it be known that a further tranche of “Pandora Papers” letters will be issued from the week commencing 11 December 2023.
An HMRC team was set up earlier this year and the compliance campaign will affect hundreds of UK taxpayers. The Pandora Papers was the largest of a number of recent leaks of offshore data, involving 11.9 million leaked documents from 14 offshore financial service companies.
HMRC has risk-assessed the data, and compared it with submitted tax returns to target cases for investigation. HMRC will only be writing to people whom they suspect may have additional tax liabilities, and the latest batch letters has been toughened up compared to what was issued earlier this year, referring both to COP9 and the risk of criminal investigation. This may follow on from HMRC’s recent efforts to reinvigorate COP9.
While the letters issued earlier in 2023 allowed 30 days to respond, the current batch, issued just before the Christmas break, will allow an extended response period of 60 days. Clearly, any recipient should seek specialist advice before responding, but it is equally important to note that the tax profiles of offshore structures can be complex. When responding, assumptions should not be made, even if, as is often the case with businesses and families with international interests, the arrangements were thought to be commercially justified when first implemented. Any review should bear in mind that in cases where there are historical tax liabilities relating to offshore matters, HMRC is often able to apply extended time limits so that it can assess liabilities going back many years, as well as potentially imposing offshore related tax penalties.
So what to do if you, or a client, receives one of these letters? Firstly, ensure that any tax analysis is professionally reviewed immediately. The appropriate response will then depend both on the refreshed tax analysis and fully informed HMRC investigation risk advice tailored to the client’s particular situation.
