London-based chartered accountants Blick Rothenberg is calling for an amnesty for British tax payers who will be caught by the implementatio...

London-based chartered accountants Blick Rothenberg is calling for an amnesty for British tax payers who will be caught by the implementation of the European Union’s Savings Tax Directive which will strike at what the firm call “the age-old tax avoidance practice of keeping your money in a foreign bank account, and illegally failing to report the interest you receive”. Blick Rothenberg partner, Steven Bruck, said: "It is right and proper that the new rules are put in place as the government loses millions every year from this sort of avoidance. The fear of penalties and prosecution will cause some to seek uncontrolled tax havens further afield, or to employ schemes to bypass the new rules by the use of off-shore companies to make such deposits. The offer of a tax amnesty would encourage those with offshore accounts to bring their monies home. " From 1 July the European savings tax directive will require banks throughout the EU (and in Switzerland, the Channel Islands, Isle of Man and other territories) either to deduct a withholding tax initially at 15 per cent from overseas residents' bank interest – unless with the depositor's prior consent, they notify the home tax authorities of the depositor’s identity. Seventy five per cent of the tax collected will come to the UK Treasury as an aggregated sum. UK taxpayers who do not agree that their European bank can advise the UK authorities of their identity, and who therefore suffer the withholding tax under the new directive will suffer foreign withholding under the new arrangements but enjoy no credit in the UK against their UK tax liability on such income for the tax withheld. They will still have to pay full UK tax on the interest when this is either declared or is eventually discovered by the UK tax authorities. Moreover, if not properly declared, severe penalties and interest on unpaid tax will arise. The effective rate of withholding tax will increase from an initial 15 per cent to 35 per cent by 2011. Mr Bruck added: "whilst this will strike heavily at many tax avoiders who have doubtless quietly maintained undisclosed overseas accounts, the more sophisticated amongst them may be expected to roam further a field to areas beyond the EU such as Bermuda or Singapore which have not yet adopted these rules. "It is anticipated that the European tax authorities will turn their attention to these territories in the not too distant future. One method being widely suggested is the formation of off-shore companies which may continue to receive interest without deduction of tax-which unless reported is of course equally a breach of UK tax law."