Offshore bank account holders are being urged to inform the taxman of their financial details, as HM Revenue and Customs (HMRC) begins sending out letters to thousands of people suspected of having overseas accounts.

Up to 5,000 people who HMRC believe could have overseas accounts are to be contacted as part of its crackdown on people who avoid paying tax in the UK by holding their wealth offshore.

An HM Revenue and Customs spokeswoman said: "We are issuing letters, forms and help sheets to around 5,000 consumers who we have got information that indicates that they have currently got or have previously had offshore accounts, but who didn't disclose it last year."

Those receiving letters will be given 30 days in which to respond or face further action. A penalty of at least 30% of the tax due on top of the full amount of the tax owed will be imposed on people who do owe tax.

Last year HMRC offered a deal under which people with offshore accounts would have to pay a penalty of only 10% of the tax they owed if they declared and paid their outstanding bill by November 26.

The move followed the big five high street banks - Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB - being forced to hand over details of offshore accounts after HMRC won a legal battle against Barclays in May last year.

The Revenue had predicted the initiative would raise £1.75bn, but current estimates put the true figure closer to £500m.

People who receive the letters are being urged to disclose any accounts in full by the Association of Chartered Certified Accountants.

Chas Roy-Chowdhury, head of taxation at ACCA, said: "If offshore account holders don't inform the taxman of their financial details proactively, the taxman will find other ways. They are intent on getting the information."

The HMRC's move was criticised by John Cassidy, tax investigations partner at PKF Accountants and Business Advisers.

He said: "Legally, to issue an assessment for unpaid tax, HMRC must have made a 'discovery' or, in other words, have actual knowledge that further tax is due, not just that it might be due."

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