People with offshore bank accounts may soon find intimidating HM Revenue & Customs ‘discovery’ letters in their post.

The letters are part of a scheme designed to find the best way of discovering tax fraud associated with offshore accounts. The letters ask for an explanation of why there is no tax liability arising from the bank account, and require a reply within 30 days.

Authorised agents will receive copies of letters sent to their clients, says Accounting Web’s Tax Zone.

The Tax Faculty at the Institute of Chartered Accountants in England & Wales (ICAEW), which has seen a copy of a letter, says: "there are plenty of people who have no intention of avoiding their tax obligations but who are under the impression that overseas income is not taxed in the UK."

"People in this category may be misinformed or badly advised, and while ignorance of the law is no defence, they are likely to be unnecessarily upset and frightened if they get a letter which talks in the first paragraph about tax evasion, and in the second paragraph about prosecution."

According to the Revenue, the letters do not constitute opening an enquiry. However, the Tax Faculty says that it "cannot see how HMRC are empowered to ask about why there is no liability" without opening an enquiry or using formal discovery powers.

The Faculty also believes that HMRC’s demand for a reply within 30 days implies that a non-reply will provoke an enquiry, which could be seen as a threat.

Taxpayers and their advisers who receive letters are advised by the Tax Faculty to double-check that there is no undisclosed non-UK bank income, and sort it out with HMRC immediately if there is.

"If there seems no reason to suppose that the tax returns were incorrect, it will be advisable to reply to HMRC to that effect, by the deadline they have given. But, from what we understand of this exercise so far, we can see no legal obligation on the recipient to provide more information than that," says the Tax Faculty.