I have inherited a Swiss Bank Account...

[Normansmith]

I have inherited a numbered Swiss bank account containing undeclared income which was taken out of the UK by the deceased parent. I am sole executor of the estate, which is currently in probate, and I am sole beneficiary. Hostile siblings who have been cut out of the will are threatening me with exposure.




Here is the background – no names no pack-drill:




I am the youngest of three brothers.




In the 1980’s and 1990’s my two elder brothers worked in the family business which was based in the UK.




We have all of us always been UK citizens and UK domiciled and have no overseas property.




The business was booming, and Father was taking a lot of cash in his London business from wealthy foreign customers who, because of their own black economy and high import duties, preferred deal in cash “off the books.” 10-20% of the real value of the sales appeared on the invoices which were given to the customer, those invoices were accounted for in Dad’s business, while the real amounts taken were recorded on copies of each invoice, which would be filed away secretly by my very efficient Mum.



In this way a substantial amount of undeclared income was accumulated. Dad would put the cash in a safe (bought for the purpose) and then, once or twice a year, while on an otherwise legitimate business trip to Switzerland, he would make deposits into a numbered swiss bank account.





I was at school at the time, but the elder brothers, who worked in the business, were witness to all this.





We were all expected to eventually share in Father’s “legitimate” estate and also, discreetly, to all share in the swiss bank account. With me being the youngest and not involved in the business, I was not privy to this information at the time, although of course I know all about it now..


Father entrusted my elder brothers with the details of the numbered swiss bank account, password, branch details, managers name, and the list of UK cash takings and overseas deposits.


I have now discovered that my two elder brothers have still got all these details, even though it was years ago.

Over the years the amounts deposited came to over £100,000.

The business subsequently closed in 2000 and two elder brothers went their separate ways, but my two elder brothers continued to be equal beneficiaries with me in parents wills. And, to be honest, we all got on fine.




After the business closed, Parents drew some of the funds from the swiss account to fund their retirement travels.




Mother died in 2005, and I divorced around the same time. I sold my house, and moved in with Father. My elder brothers were already married and had their own lives, but to be fair they kept in contact with Father until his death.




Now here is the problem: after I moved in with Father he decided that I should inherit all his estate, not out of malice or estrangement, but because the other brothers were settled, and I was the one living with him and caring for him.




He and I had overlooked that elder brothers would still hold details of the Swiss bank account, and had not anticipated how they would react to this.




Father became ill in 2008, and in that year he gave me approx half his estate (real estate worth £600,000) and changed his will to make me sole beneficiary and sole executor. Father died in January 2009




Father’s UK estate is worth circa £500,000 currently, prior to probate. This is the amount I am declaring to HM Inland Revenue (Plus the value of the recent gifts received which are added back into the estate for IHT purposes)




However my IHT declaration as executor does not include the swiss bank account. (Obviously!)




The substantial gifts to me, and the change in the will were all done without the knowledge of my elder brothers, who had always been expecting to share the estate. The brothers are now furious with me. They want me to split the estate equally with them by deed of variation.




The problem I have is that the brothers have all the details and records of the undeclared takings and deposits in Switzerland. They are threatening to expose this information if I don’t co-operate.




At the moment, myself and my brothers are the only people in the world who know about the undeclared income in my Father’s estate.




The funds were diverted from a UK limited company to one of the directors (Dad) without VAT, National Insurance, or income tax paid at the time. How would the penalties and interest multiply? I have had conflicting advice from people who I have asked the question “hypothetically”




In the first instance I was told that since some of the transactions were 20+ years ago, they are outside of the statute of limitations. I should consider declaring the Swiss bank account in the Probate accounts, and pay IHT on the capital that is left in it (and back tax on the interest for the last 20 years)




Then my advisor realised that where there is solid evidence of Tax Fraud (such as that my brothers hold) then there is no such 20 year limitation. The revenue will go back as far as the evidence allows. As executor I would be liable for huge penalties and compund interest, which could wipe out Father’s UK estate completely.




I have also been advised that there is a real risk that the residual estate is not large enough to cover the back-tax and penalties, and since the large gifts of around half Father’s estate were given to me so close to the date of Father’s death, they could be confiscated.




I get on very well with the probate solicitor who I have appointed myself, but obviously I have not (yet) mentioned the offshore funds or history.




My questions are:







1) What will happen if I disclose the history of tax evasion in my father’s estate to my probate solicitor, and ask him how I can “outwit” my brothers? Would he be duty bound to report. Dare I mention it to him at all?





2) How potentially damaging would a full disclosure either by myself or my brothers of the Swiss bank account (including all the history of UK cash transactions which were undeclared and taken out of the country)







There is now massive antagonism between myself and my elder brothers. I absolutely don’t want to concede anything whatsoever to them, but they are taking the view that “If they don't get anything, they will make sure that I don't get anything either”. Since they are disenfranchised and neither executors or beneficiaries they have nothing to lose and everything to gain!




I thought that being sole executor and beneficiary would put me in a position of strength but actually I feel completely the opposite...




What should I do?

[robbob]

Hello Norman

Not sure what the legal perspective is but from a moral point of view i do not see why you think you should be in a position of strength.
if this turns out to be "stolen" money from other taxpayers is the right thing not to come clean and do the right thing with this money. if you are left with a penny this will be a bonus.

It would be easy for any legitimate businessman to have a fortune stashed away if they turned to the darker side and did not pay.
17.5% vat on sales.
Did not pay 20 odd % corporation tax.
Avoided Payroll Taxes.
A very high % of a legitimate businesses turnover goes to the taxman so that we can have an Education a Health Service and State Pension that people in most parts of the world could only dream of.

I would come clean with all you know immediately and put this matter behind you.
It may be sensible to ensure any advise you get is from someone suitably practiced in this kind of matter.

[Hedgie]

Dear Norman
I urge you to read the declaration on the back of the inheritance tax form before you sign it! You are at risk of fraud if you do not declare the Swiss assets.

Plus your probate advisor (solicitor) will presumably as I write this be reporting the matter to NCIS.

There's no avoiding having to come clean I fear

[Peter D]

I think you are foolhardy to reveal this on an open forum. HMRC may be reading this as we speak. Your credibility is out of the window if they come to you before you go to them with a full declaration. The good news is that you were not involved at the time and only became involved by matter of information. Your brothers however may/will be liable to investigation on more serious charges then yourself. You need some seriuos face to face professional legal advice. For all you know your probate solicitor may be reading this as I type. I would even consider paying the £10.00 fee and having this thread locked and removed. I'm seriuos. Regards Peter

[Peter D]

I hope you are not actually Norman Smith and if not you have not used that ID anywhere else.. Regards Peter

[Normansmith]

Hello again.

First off - Norman Smith is an alias, and I have never used it anywhere else. | understand the gravity of the situation. I am simply looking for some practical advice or opinion before I reveal anything to any professional.

My brothers were witness to the tax evasion, but they were not beneficiaries in any way. They are not signatories to the swiss bank account, and neither am I. The information they have is projudicial only to myself, as beneficiary of the money, and to myself (again) as executor of father's estate.

The swiss bank will need to see both my father's will, the grant of probate, and some ID from me to prove I am the beneficiary. That aspect is just the same as any financial institution (although a bit more cloak-and-dagger than the local HSBC). Once I have that I will be entitled to the remaining funds in switzerland.


Normally, nothing further happens, the money is not declared, and the beneficiary quietly takes an easyjet to Zurich and nothing is traceable.


My brothers have no claim on the money, it is I who has inherited it. They were cut out of the will.

This of course makes them very dangerous witnesses against me.

As beneficiary of the residual account - If I don't declare the residual funds.

f I do declare it for IHT there is the question of how the funds came to be there. I can throw my hands up in the air and say I have no idea and normally there would be no further evidence. I would probably only pay IHT on the capital and tax on the undeclared interest over the last 20 years. Without any proof that the capital deposited was due to tax evasion, that is as far as I would think it would go.

But brothers have all the records of the source of the funds and the deposits. They can prove that the funds were taken out of a UK company fraudulently.

They have threatened that, if I don't split father's estate with them, they will expose the full details. In this case I am concerned that the charges will then be back-tax, penalties and interest on the ALL THE CAPITAL DEPOSITED over the life of the account; plus the tax on the interest.

This is where it is possible for the penalties to be so great they will wipe out the estate.

I am in a catch 22 situation. I am not looking for a moral judgement, just how to deal with this without conceding to my bitter and vengeful brothers, and without revealing anything to a professional who would be duty bound to report.

I would really appreciate some help because it seems to me that I have no choice other than to concede to brothers, take this skeleton out of the cupboard and bury it.

But I don't want to give anything to brothers, father did not want them to get anything, and nor do I.

So I am looking for the best way out.

Norman (a normal kind of chap) Smith

[Peter D]

OK it is clear you just do not listen. I suggested you are foolhardy yet you proceed to incriminate yourself and you brothers. You are totally barking and no one on this Forum will assist you, at least not on the open forum. If you said in a court of law what you have said here then you could well be sharing a cold shower with a few hundred other inmates every morning due to prison sentences applying to perverting the course of justice. Please do not post again and invest ten pounds and have the thread removed. You are in deeper than you realise. Regards Peter

[Lambs]

In a break with tradition, (which I am sure I shall rue), Peter D,

I hardly think that N's doors will be kicked in by the officers of HMRC or anyone else for that matter, for posting such a query on TW.

N, Peter does have your best interests at heart, to be fair.

The point of TaxationWeb is to inform, to educate and ( to a certain extent ) to advise tax professionals and the unrepresented taxpayer - particularly in the context of the forum. This seems like an excellent case in point. N presents a choice of options which he contemplates and seeks the benefit of counsel. Without wishing to sound patronising, HMRC is unlikely to be seeking permission for tracing N's IP address and tapping his 'phone for tax on £100k, just in case he does decide not to disclose. Yes, I do realise it's not just tax but interest and penalties. But imagine the potential adverse publicity for HMRC if it turned out that he WAS going to follow advice and disclose, and that only came to light after his front door was off its hinges. Having said that, if there were another '0' or two on the end, then I might not be so confident.

N, any professional adviser can ONLY advise you to make full disclosure of the facts that you possess. Bear in mind that such professionals are (very basically) required to report suspicion of money-laundering, etc., to the authorities and that would quite possibly include the solicitor advising you in your capacity as executor of your late father's estate. From what I have read of your postings, you have neither evaded paying tax, nor been complicit in doing so. That would, I think, change, if you were to decide not to disclose / pay tax on the funds you have uncovered.

However, the thing that most prompted me to 'contribute' to this query was the wonderful dilemma which apparently faces your brothers. Unfortunately, it would appear at first blush that they don't yet share the realisation of their predicament.

Yes, they may well be able to provide ample evidence of the source of these funds and that they haven't already been taxed. But in doing so would that not also serve as excellent evidence that they were for a substantial period of time possibly complicit in (or at the very least witness to) what would appear to be a long-running activty of tax evasion? And yet did nothing? It would also appear that they are potentially adding blackmail to their list of ...dare I say misdemeanours? I am no legal expert but it would appear that they are on far shakier ground than you. It's just that they don't know it. Or admit it.

My advice to you is separately (and promptly) to engage a suitably qualified tax professional, who has experience in such matters. They do exist. This is not all that uncommon an occurence. That professional will guide you on how best to deal with disclosure, etc. There are some new rules that came into play for penalties, etc., at the beginning of this tax year, which positively encourage full and unprompted disclosure, with minimal penalties. The problem there is that the apparent 'errors' on returns are not yours, nor are they recent, but your father's, those of the family company, etc., and they go back many years. That's why you need a good, experienced adviser.

The quandary I might face in your shoes is whether or not to try to facilitate your brothers' hoisting themselves on their own petard. I might be considering what evidence there is, what has been committed to writing, where it and how (and whom) it might implicate. I might just be considering speaking to a criminal lawyer as well. But I am not expert in such matters, and it is not my family.

In the end, and looking at it purely from a tax perspective, I essentially echo R & H's advice: it's not power you have but responsibility, as Executor. Beneficiary comes later.

Regards,

Lambs

[Peter D]

I am pleased that another contributor has added to this thread and Yes the OP needs some well versed professional advice to resolve the issued here. Regards Peter

[overseas-crouchy]

This post may now be dead, but thought I had best add my tuppence worth.

Whilst you may be facing a quandary as to whether to declare over in the UK, your chance of actually releasing the funds from the account without doing so is severly limited.

All correspondence between you/family and the bank must be Notarised and Legalised (FCO), so you would not just be in conflict with HCMR, but also the Swiss authorities and the FCO.

I have dealt with a UK estate that had assests in a german account with the same level of IHT due. In some cases it may be best coming clean and coming to a payment settlement - if the infringements go that far back HMRCs records dont (in a computerised Database sense), so for them to carry out searches will take longer.

It should be remembered that the number of HMRC Inspectors vs number of suspect cases is heavily outnumbered, so it may be better to 'fess up' and get it over with.

Cheers