A man reports to the Inland Revenue with concealed Swiss bank accounts. What he conceals: he also has accounts in Luxembourg, in the name of shelf companies. The inspector discovers this after all and taxes the assets in box 3. However, the court rules that there is a substantial interest. On balance, the man gains nothing.
Number accounts and shelf companies
A man holds assets in foreign bank accounts for years. First in Switzerland, later also in Luxembourg. When Luxembourg abolished number accounts, he put the accounts in the name of British shelf companies. These are shell companies with no activities, which only served to disguise the real owner. The man is sole shareholder and director. He can dispose of the money freely. In 2014, he closes all accounts and withdraws almost €156,000 in cash. When the Swiss bank warns him that his details will go to the tax authorities, he files a redemption notice. However, he ‘forgets’ to report the Luxembourg accounts.
Box 3 or box 2?
The inspector traces the Luxembourg accounts through Swiss account transactions. He taxes the assets in Box 3. The man objects, claiming the money is no longer at his disposal. The court does not believe him. He has no proof of consumption, even though he deposits thousands of euros in cash into his Dutch account every year. The presumption of proof is therefore that he still has the money.
Next, the inspector does something remarkable. He argues that he taxed the assets in the wrong place. The Luxembourg accounts were in the name of companies of which the man was sole shareholder. That means a substantial interest. The amounts he withdrew from those companies are taxable in box 2 and not in box 3. The tax in box 2 is higher than that in box 3. The inspector invokes internal compensation. The tax assessment is allowed to stand, because under the line it is too low rather than too high.
Repentance fails
The man still argues that he turned in voluntarily and therefore does not deserve a fine. The court rejects this. He turned himself in only after it became known in the media that the tax authorities were requesting information from Swiss banks. Moreover, he concealed the Luxembourg accounts when he turned himself in. That is not voluntary disclosure, but damage control. The fines largely stand, albeit the court reduced them insofar as they were based on box 3, whereas box 2 applies.