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February 18, 2015updated 01 Feb 2016 10:18am

Anyone on HSBC's Swiss list is tarnished, guilty or not

By Spear's

Despite only three people on the notorious HSBC Swiss account holders list being considered for prosecution, politicians and the media are still over-reacting says Arabella Murphy

Just as the MPs’ expenses scandal made hate figures of all parliamentarians, whether they had bought a duck house or a desk lamp, so the HSBC scandal threatens to engulf everyone with foreign bank accounts, and families who do tax planning, whether they’re guilty of tax evasion, tax avoidance or nothing at all.

A mere week after Panorama exposed the list of names of HSBC’s Swiss account holders, we have already arrived at a point where the Opposition wishes to scrutinise the appropriateness of the humble deed of variation (among other tax advantages currently available to anyone).

Already, public opinion has shifted from thinking there may have been a few bad apples in the barrel, towards feeling that all holders of non-UK accounts must be galloping tax-dodgers.

It is one quick step from there – via Parliament, where the pointy-finger brigades each accuse the other’s leaders or donors – to concluding that anyone who takes steps to plan for their family’s future must be engaged in tax avoidance of the unsavoury kind, rather than tax planning. And now it’s fun, because we can conflate our dislike of bankers, politicians and tax avoiders in a single story.

HMRC explains that – of 6,800 names on the original list – half were duplicates, 1,000 paid outstanding taxes (with penalties and interest) and of those, only three were considered for prosecution. They are not congratulated on having recovered the tax, but berated because no-one is in prison.

The Leader of the Opposition protests that he didn’t avoid tax by using a deed of variation, because he paid capital gains tax on the sale of the property he part-inherited as a result. (This isn’t quite the point, but the punchline must be true: if the property would otherwise have passed to his mother tax-free, she could have sold the house and spent the money or given it away, so nothing has been avoided except the possibility of some future inheritance tax if she didn’t.)

Wouldn’t HMRC (and our leaders) do everyone a favour by giving this some context? HSBC’s list was from 2007. Since then,fortunately, the world has taken great strides towards transparency. We now have a raft of information exchange treaties, the Savings Tax Directive which leads to disclosure or the withholding of tax, the Swiss disclosure facility which has encouraged huge numbers of non-compliant people to clean up their act, and new-generation disclosure laws such as FATCA.

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If there is still anyone out there who doubts the way the wind is blowing, here’s news: it won’t be long before their accounts are all huddled together in the last remaining non-compliant armpit of the financial services world – and wherever that is, most people would probably pay good (tax) money not to keep their life savings there.

In a perfect world, HMRC would do more (white listing, paid-for clearance procedures) to help people know when they don’t have to pay tax, as well as when they do. In this fantasy, the word ‘avoidance’ is dropped – no-one knows what it means, and we must be clearer on where the good/bad line lies.

Meanwhile, let’s be clear – an eight-year-old list tells us nothing about current standards of compliance, a non-UK account is no more sinister than an account in Brentwood, a trust or a deed of variation is usually just sensible financial planning. But a duck house is still bizarre.

Arabella Murphy is a partner at boutique private wealth law firm Maurice Turnor Gardner LLP

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