Tax expert issues alert over offshore ‘gifts’

The highest–profile manager of English football being acquitted of tax evasion could prove to be an own goal for other individuals with money in offshore bank accounts, accountants warn.

Despite Harry Redknapp being cleared of cheating the public purse, taxpayers who say funds in their offshore account stem from ‘gifts’ from friends are being urged to have the paperwork in place to back their claim.

In Mr Redknapp’s case, he was found not guilty of evading income tax and National Insurance after a convincing a court that funds in a Monaco bank account were strictly “seed money,” gifted to him by a friend to help build an investment.

He was able to demonstrate that funds in the account were not from the payment of a bonus - “a reward for services” as HM Revenue & Customs alleged, or any other form of employment income which should be subject to tax and NICs.

But despite losing the case at considerable cost (up to £10million according to one estimate), the Revenue is unapologetic for its actions, speaking of “no regrets” about pursuing Mr Redknapp through the courts.

For accountants at Saffery Champness, the Revenue obviously wanted a high-profile conviction and, through the use of “scare tactics,” intends to now “provoke further voluntary disclosures” from other people with banks accounts offshore.

As a result, explained partner Ronnie Ludwig of the firm's Edinburgh office, insisting to HMRC that funds in an offshore account arise from  a ‘gift’ from a friend is unlikely to wash where taxpayers cannot produce documents to evidence such a claim.    

“Despite losing the Redknapp case, it is clear that the Revenue is prepared to go to court to chase individuals it believes are evading tax,” he said. 

“Innocent taxpayers are advised to get a signed document from a solicitor to support any gifts of large sums of money into their accounts.”

A spokesman for HMRC said: “Tax evasion is not a victimless crime because every penny of tax evaded reduces the UK’s ability to pay down the deficit and support our public services. That is why we relentlessly pursue those we believe are evading tax.”