GCC nationals who spend part of the year in the UK have been warned they could be caught in a British government campaign to recover unpaid taxes. Legal experts say GCC nationals with an address in the UK could be among those who see their bank deposit details handed to HM Revenue and Customs (HMRC) as it tries to crack open international tax havens.
More than 300 banks and financial institutions with branches in the UK were ordered on Wednesday to disclose the financial information of UK residents with offshore accounts. British expatriates who divide their time between their home country and abroad are among those who could see their accounts scrutinised under the initiative. Now, GCC nationals could also be snared as HMRC casts its net to trace and recoup lost tax revenue.
"Arabs, including UAE nationals who spend the summer and other time during the year in the UK, could have their financial information examined," said Al Harith Sinclair, the Middle East head of financial regulation for the law firm DLA Piper. An individual who is in the UK for 183 days or more during the tax year and visits the country for an average of 91 days or more a tax year over a maximum of four years is classified as a UK resident under British law.
"The nationality of the individual is not the issue; it is the question of whether there is an unpaid liability to UK tax," said a spokesman for HMRC. Investors are to be given an amnesty of up to 90 days beginning on September 1 to volunteer details of their deposits in exchange for a lenient penalty of 10 per cent of the unpaid tax. Those who fail to make a full disclosure face a minimum penalty of 30 per cent of the unpaid tax and possible criminal prosecution.
Individuals may also see their names published on the internet if the unpaid tax exceeds £25,000 (Dh151,000). However, most GCC nationals with interests in the UK have likely worked to ensure they are not evading tax, said Alexandra Timotheadi, a director in the private banking division of the Dubai-based asset management firm Sarasin-Alpen & Partners. "Most of those who spend time in the UK don't spend more than three months there and have tax advisers, so would be informed of any risks and wouldn't be affected," she said.
Under UK law, it is possible for an individual to be both a resident in the UK and another country. However, the UK has a double taxation agreement with more than 100 countries, including Saudi Arabia, Oman and Kuwait. In certain cases, this agreement allows an individual to pay tax in just one country, usually the country with the higher tax rate. The UAE does not have such an agreement with the UK.
Revenue authorities are becoming increasingly keen to trace unpaid taxes to boost revenue amid the economic crisis. Since HMRC began its disclosure campaign in 2007, about 50 banks have been asked to provide information on account holders. Its first initiative in 2007 raised £450 million from about 45,000 people. Under a similar initiative, HMRC agreed to a deal with banks in Liechtenstein on Tuesday that could see the closing of about 5,000 UK investors' accounts holding a total of up to £3 billion, unless customers volunteer details of their deposits.
The UK government has previously signed deals with tax havens such as Jersey, Guernsey, the Isle of Man and the British Virgin Islands involving the transfer of financial data on residents of the UK. The US Justice Department agreed to an out-of-court settlement this week with the Swiss bank UBS, under which it would reveal the names of at least 5,000 wealthy American clients suspected of tax evasion.
The authorities believe the 52,000 US clients of UBS may be hiding almost $15bn of assets. email@example.com