A landmark ruling has granted the UK's HM Revenue and Customs powers to force Barclays to disclose details of UK customers' offshore bank accounts. It is expected that the ruling will also affect other banks, meaning thousands of customers could face the prospect of having to pay billions of pounds' worth of extra tax.
With seemingly no intention to appeal the ruling, Barclays has reportedly already confirmed that it will hand over details of its customers’ overseas accounts before the end of June 2006.
However, it is not only Barclays customers who are expected to be affected by the decision. A spokeswoman for Barclays is quoted in The Scotsman as saying: Barclays has not been singled out. This is very much an industry-wide issue and it’s our understanding that other financial institutions have been contacted.
According to the Financial Times, the UK tax authority believes the ruling could yield GBP1.5 billion in unpaid tax from Barclays accounts alone as information about previously undeclared interest is revealed.
The offshoring market has already taken a knock in the past year as the EU Savings Tax Directive (EUSTD), which took effect on July 1, 2005, has reduced the attractiveness of offshore deposits and other ‘interest bearing’ products. This initiative was launched to provide for the formal exchange of information between EU member states about interest payments made in one member state to residents in another member state.