From Out-Law.com

Plans to create a public registry of the real owners of UK companies should be extended to make it clear who is behind the companies that own high-value London properties, Global Witness has said.23 Jul 2015

The anti-corruption campaigning group said that it had uncovered evidence linking the ownership of “big chunks of Baker Street” to “a former Kazakh secret police chief accused of murder, torture and money-laundering”. It called on the UK government to investigate the ownership of these properties, and to make “systemic changes” to the way in which land ownership is registered in the UK.

Global Witness said that London’s high-end property market was increasingly becoming “one of the go-to destinations to give questionable funds a veneer of respectability”. At least £122 billion worth of property in England and Wales is now owned by companies registered offshore, often in jurisdictions like the British Virgin Islands (BVI) and with only ‘nominee’ directors on file, it said.

“Our research shows property is a big blind spot in the UK’s anti-corruption fight, and that has dire consequences,” said Chido Dunn, a senior campaigner at Global Witness. “Some of the Gaddafi family’s stolen loot ended up in London – a famous example but far from a one-off. Unless we know who is behind these companies and where their money has come, the cash will keep pouring in.”

“This latest example shows the urgent need for transparency in the UK’s property market and its system of company ownership,” she said. “We need to be able to know who owns London’s properties and where the money to buy them came from.”

Global Witness called on the UK government to require companies that own UK property to tell the Land Registry who their beneficial owners are, and to work with the British Overseas Territories and Crown Dependencies on the creation of their own public registers of beneficial ownership. Real estate agents should also be made to carry out checks to make sure they know who is behind a company that is buying UK property, in addition to conducting anti-money laundering checks on sellers, it said.

The UK committed to the creation of a central registry of companies’ beneficial owners, meaning those that hold more than 25% of a company’s shares or voting rights, as part of its G8 presidency in 2013. The requirements will apply to all UK bodies corporate that currently register information on their members at Companies House, including limited liability partnerships, and the register will be made available for public inspection. It is due to be up and running next April.

Civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said that the transparency improvements called for by Global Witness would “make it much more difficult for fraudsters to dissipate cash through offshore accounts and then, by way of offshore structures, buy assets including property in the UK and thereafter live off their ill-gotten gains”.

“Sophisticated civil fraud lawyers do know how to identify the ultimate beneficial owners through various types of disclosure orders in offshore jurisdictions, such as the British Virgin Islands,” he said. “However, this can be expensive as disclosure is usually sought from the offshore banks to ‘follow the money’ and thereafter the offshore trust companies that set up the trust structures directly to hold the onshore UK assets.”

“This all takes time and money; and in a modern society why should fraudsters be able to use these structures to place victims at a significant disadvantage and thereafter force them to spend their funds, which are usually scarce because of the fraud, to identify the ultimate whereabouts of funds that are possibly in the UK,” he said.

For more on this story go to: http://www.out-law.com/en/articles/2015/july/more-transparency-over-uk-prime-property-ownership-needed-to-prevent-fraud-campaigners-say/
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The future is transparent

By Claire Shelemay From Globes Israel

As banking secrecy comes to an end, taxpayers with overseas assets should ensure they are on the right side of what can be draconian law.

It is widely recognized that offshore banking secrecy is fast becoming a thing of the past. The signing of bi-lateral and multi-lateral agreements between jurisdictions and the fast approaching Common Reporting Standard (CRS) under which jurisdictions will automatically exchange financial information has seen to that. The UK’s voluntary disclosure program with the most beneficial terms the Liechtenstein Disclosure Facility (LDF) – is closing in December 2015 and soon too will become a thing of the past.

Those who disclose can regularise the past and set the record straight for the future, and not worry about the risk of being caught by tax authorities or dealing with the severe consequences once caught.

Nowhere to hide

Under the CRS, financial institutions must provide information on their foreign account holders to the tax authorities; the tax authorities will then automatically share this information with other tax authorities. The financial institutions will use the information available to them to determine where the foreign account holder is resident. The first exchange of information will take place in 2017 and this includes the UK. Israel will exchange information from 2018. 94 jurisdictions have already committed to the implementation of the CRS.

Almost all major international banking jurisdictions have committed to comply with the CRS, leaving very few options for those seeking to transfer their monies elsewhere. Bearing in mind that, against all odds, political pressure ended Switzerland’s era of banking secrecy, it may only be a question of time before other jurisdictions sign up to the CRS or adopt some form of banking transparency.

Countries will no doubt be using their technological capabilities to examine the information they will receive from the automatic exchange of information. For example, the UK government will invest £4 million in data analytics resources to maximise the yield from the CRS data.

Mosher Asher, Director General of the Israel Tax Authority (ITA), recently described Switzerland as previously being the world’s ‘vault’ from which no information could be extracted, while now, “banking secrecy is over.”

If you’re caught…

In the UK, HM Revenue and Customs (HMRC) recently published a consultation document setting out details of a new criminal offence for offshore evaders. This has faced heavy criticism in the press and by the legal community. This is in contrast to the guaranteed immunity from prosecution offered by both the LDF and the Israeli voluntary disclosure program, which may be invaluable to clients. The proposed strict liability offence will apply to those not declaring offshore income and gains in all overseas jurisdictions, not just those jurisdictions which are not part of the CRS. The key here is that HMRC will not need to prove that the failure to notify HMRC or declare the offshore income and gains was deliberate. The maximum penalty would be a prison sentence of up to six months. The proposal that the offence will only apply if the “potentially lost revenue” exceeds £5,000 is hardly comforting.

The draft legislation does however provide a defense if a taxpayer can prove that they had a “reasonable excuse” for the failure although it is hard to predict what HMRC will accept as a “reasonable excuse.”

Whilst the LDF offers a full amnesty prior to 6 April 1999 and penalties are fixed at 10% for most years, if identified first by HMRC, onerous penalties (up to 200%) will be levied, and HMRC will seek to tax undeclared income and gains over the last 20 years.

Israel’s role

Israel has focused investigations into undeclared accounts held by Israelis overseas a significant amount held in Switzerland. Israel has a number of lists of accounts of Israeli clients of Swiss banks to assist them in these investigations.

The Bank of Israel recently sent a finalised directive to the banks in Israel whereby all foreign account holders must sign a declaration confirming they pay the relevant tax in their home jurisdiction. Foreign account holders must also sign a waiver of confidentiality to allow the Israeli banks to pass information to and receive information from tax authorities abroad (without the customer’s express permission). For those who do not cooperate, the Israeli banks can freeze the accounts or restrict their banking services (including refusing to authorise withdrawals). Many account holders who haven’t received these forms, perhaps as the bank does not hold a current address, will find themselves in an awkward position if they are unable to use the account to fund regular offshore expenditure, or if the funds are needed quickly for a specific investment.

Foreign account holders can’t afford for their accounts to be frozen, but they should review their tax position and speak to a professional adviser before signing these forms.

The UK Summer Budget announced that those who are resident and non UK-domiciled (RND) will have to pay tax on the arising basis (i.e. on all worldwide income and gains) after 15 years of residence. This is another reason for UK taxpayers with offshore assets to review their tax affairs now.

Voluntary disclosure

The Israeli voluntary disclosure program is due to expire in September, although there have been hints that it will be extended. The LDF for UK tax liabilities closes in December 2015. A tougher “last chance” disclosure facility will be offered in the UK between 2016 and mid-2017 (i.e. the start of automatic information exchange), with penalties of at least 30% levied and with no guaranteed immunity from criminal prosecution.

As at March 2015, the total yield generated from LDF settlements was over £1 billion relating to approximately 5,500 cases. Interestingly, the majority of these cases did not result in settlements with overwhelming figures, but related to modest settlement figures (e.g. under £100,000). This is in line with our own general findings that many clients are living modestly in the UK but have a nest-egg (possibly inherited from family members) in an offshore account which is largely untouched.

Now is the time for taxpayers to take full advantage of the beneficial terms of the LDF and the full amnesty prior to 6 April 1999 before it closes in December 2015.

The future’s bright? Well it certainly is transparent.

Claire Shelemay is a UK tax specialist living in Israel. She specialises in tax dispute resolution to resolve UK liabilities for UK residents and Israelis.

Published by Globes [online], Israel business news – www.globes-online.com – on July 26, 2015

For more on this story go to: http://www.globes.co.il/en/article-the-future-is-transparent-1001055804