Expat Kidnap Charter?

 British expats live in some very exotic climes but unfortunately some are subject to industrial proportions of kidnaping. British expats are not immune. One report by Clayton Consultants Inc on the Philippines kidnap cottage industry suggests ‘the amount of money asked by the gang is a result of background research prior to the abduction’ and more worryingly ‘In coordination with this insider, the group snatches the victim …’

Currently HMRC have certain powers to investigate cases of tax evasion using their ongoing investigative powers within the current legislation. These were substantially increased by the Serious Crime Act. A proposed new piece of legislation currently under consultation under an extension to section 36 of the 2008 Finance Act now proposes to allow HMRC to sanction senior authorising officers the power to obtain ‘relevant information’ from ‘a person’ i.e. any third party. To quote the HMRC document ‘The relevant information is narrowly defined and only consists of name, address and date of birth (if known) of the person to whom the identifying information relates.’ This assumes that Article 26 of the OECD Model Tax Convention on Income and Capital is followed which states ‘Any information received under paragraph 1 by a Contracting State shall be treated as secret’ and  ‘such persons or authorities shall use the information only for such purposes.’

Fortunately the UK does not have a cottage industry of kidnaping but this should not stop them considering the possible wider implications of a request for relevant information. We have all had safeguards from our own institutions that our information will not be divulged only to receive a call from one of the institution’s financial advisers offering investment advice which coincidentally comes just after we have transferred a large amount into our account from another source. Imagine that such information was required by the HMRC regarding an expatriate living in a country that has a kidnap and ransom industry. HMRC contact the bank or other institution under their proposed draft new power [paragraph 5A, Finance Act 2008] requiring the information of name, address and date of birth of the expat concerning a large transfer of funds or other financial notification.

Questions to ask; Is there an authorised officer in the foreign bank who is familiar with OECD Article 26? Is he going to deal with this solely himself and not pass it to a subordinate? Is he going to ensure that the means of delivery of information is only handled by him/her? I think we can all guess the answer to all these questions!

The nightmare scenario is that there is a person in the bank who covertly or inadvertently makes the information required by HMRC i.e. large transfer, name, address and date of birth, available to a colleague/relative/kidnap associate! Indeed, even the UK banks are not immune as the Daily Mail, 3 August 2011 comments on bank fraud ‘…each case is likely to hundreds or even thousands of customers. The majority of these details were sold on to organised criminals.’

No one would be aware that an enquiry in certain countries could indirectly result in a possible kidnap and ransom demand. It would be eventually classed as a failure to adhere to strict confidentiality guidelines somewhere abroad. The UK has no kidnap industry but a lot of the places that it requests information from do!

How to get around this problem is to consider each time a transfer is made of funds, etc it is potentially liable to an enquiry approach. Check with the local bank who is responsible for handling such enquiries and what is his/her authority and get a copy of the bank’s confidentiality rules. State that no information should be divulged to third parties unless you are informed and the bank’s computer appropriately red flagged. There is nothing to stop the bank or institution advising you when such an approach has been made. In many cases such information is not relevant because expats are normally non-UK residents and are not taxable in any case in the UK. Therefore when leaving the UK the relevant UK departure forms (P86) should always be filled in so that the Revenue is aware that UK non-residence is in point and will not make any unnecessary enquiries. All in all keep capital sums in the local bank jurisdiction to a minimum with the feeder account in another ‘safe’ offshore banking jurisdiction.

Jon Golding ATT TEP is a UK tax reduction specialist with PI Ltd in Kuala Lumpur. Contact (+60) 3 6203 2621 or visit website www.goldtaxservices.com