Research has shown that UK residents are saving billions in tax by having money in offshore tax havens.

The Channel Islands and the Isle of Mann are among the most popular spots UK residents choose to store their savings according to the research compiled by the TUC.

According to EU rules, UK residents are allowed to declare interest earned overseas or have 15% held back from interest in the chosen offshore country where the account is held.

Although this may not be an issue for much longer, as MPs are asking for a review into the use of such accounts.

According to EU rules, three quarters of the 15% tax on interest earned in offshore accounts is eventually paid back to the UK government. But this means that only 11.25% instead of 40% is being given back according to the TUC.

£4 billion – a “serious underestimate”

By extrapolating data from an answer to a parliamentary question, £4 billion was estimated to be stored tax-free in offshore accounts.

During the last three years, £319 million of tax, of a total income of £1.1 billion has been lost to their holders.

The TUC have warned however, that this is a “serious underestimate” and has called for the EU Savings Tax Directive to be reformed, allowing tax benefit on overseas funds.

TUC General Secretary Brendan Barber said: “The mechanisms of tax avoidance are always hard to understand, but this is a very simple story. If the super-rich held their money and assets in the UK they would contribute at least £4 billion extra.

“This would be enough for the government to meet its target to halve child poverty by 2010. It would also mean that instead of being squirreled away in tax havens, it was being spent in the real economy here helping us fight recession.

“With the tax take falling because of the recession, there can be no better time to get tough with the super-rich, so many of whom did so much to throw the world into recession.”

Government Going Easy on Offshore Accounts?

Related to this, it has also been reported that opposition MPs are planning on calling ministers to disclose how much offshore subsidiaries of taxpayer-funded banks were costing in lost revenue.

For example, Lloyds has over 125 offshore companies and RBS has 238.

However, it has not been suggested that any laws have been broken by tax sheltering, but George Osborne, shadow chancellor, told the newspaper that a “lack of coherent strategy” was being shown my little governmental action against offshore firms owned by banks that have recently been rescued with taxpayers money.

What Do You Think?

Should offshore accounts be taxed on par with UK held accounts? Is the government losing billions because it is still overlooking these accounts? Leave your views here.