Beware the ex-spouse spilling the beans to the taxman

20 October 2015

Mike Down

Last week’s matrimonial news reports have highlighted the fact that upon divorce, spouses do not always 'own up' to a full catalogue of assets held. When faced with the prospect of making a full disclosure of their monetary affairs to the Court, it is not unknown for people to find themselves in an uncomfortable position where they have been less than open with HMRC regarding their financial business dealings. Similarly, some aggrieved spouses may consider using the threat of approaching HMRC as a tactic in the divorce.

In particular, one party to the marriage may be aware that the other has certain interests offshore but will not fully comprehend them. This can lead to unnecessarily complicated and protracted correspondence involving both sides of lawyers as the sceptical non business party seeks to understand what has taken place.

As a result of the ever-increasing volume of information gathered by its 'CONNECT' computer system, HMRC is now obtaining extensive and detailed data about the financial affairs of UK taxpayers. This facilitates the improved risk-selection of cases ripe for investigation and there is no doubt that information from discontented spouses 'spilling the beans' will be of real interest to the department. Those with tax irregularities to disclose should act quickly to put things right as the ability to register under the Liechtenstein Disclosure Facility (LDF) comes to end on 31 December 2015. The LDF provides beneficial terms for settling past tax liabilities including immunity from criminal investigation of tax offences. This immunity applies for purely UK tax issues as well as those arising as a result of a failure to disclose overseas income and assets.

As the net closes on tax evaders, public perception now endorses the sentiment that all have a moral duty to disclose their financial affairs to HMRC and pay the right amount of tax. It could be that the threat of an impending divorce may encourage better tax behaviour. Without doubt, those with historic tax issues who are going through a divorce would be well advised to seek specialist professional assistance in making a disclosure to HMRC before the lawyers and the Court are aware of what has been going on.