By Louise Greenwood BBC Radio 4's Money Box

The Isle of Man is one of the places that will be affected

New rules aimed at stopping investors hiding money in offshore accounts may not bring an end to the practice, tax experts have warned.

For years, some of Britain's wealthiest people have evaded tax by keeping money in offshore bank accounts in places like the Channel Islands, the Isle of Man and Switzerland.

However from the 1 July the new EU Savings Directive, means banks holding these accounts will have to inform the Inland Revenue or pay a so called "withholding tax".

They send a letter to the Inland Revenue telling [them] what interest you earned Mike Warburton, Grant Thornton

Speaking on BBC Radio 4's Money Box programme, Mike Warburton of accountants Grant Thornton described the changes as an "information exchange".

"It's exactly as if you deposit your money in Barclays bank Hemel Hempstead," he said.

"They send a letter to the Inland Revenue telling [them] what interest you earned. A similar mechanism will work whether you are investing in Jersey or Switzerland."

"But on top of that, those countries that aren't applying [to the directive], so for example, Austria, Belgium, Luxembourg, and the non EU countries, they will apply a "withholding tax... initially 15% of the interest that's generated."

That 15% will escalate up to 35% by 2011 and will be paid from the country that has collected it to the UK authorities.

New locations

People with money in overseas accounts must pay UK tax but can deduct the withholding tax they have already paid on offshore money from their annual return.

The government hopes to claw back around �80 million out of the several billion pounds held outside the UK, but experts have warned that as a money raising exercise it may already be too late.

If someone is intent on evading their tax liabilities there are other places they can send it, like Singapore or Dubai Mike Warburton, Grant Thornton

Mike Warburton told the programme he believes the super-rich will simply move their cash further afield, where the rules do not apply:

"If someone is intent on evading their tax liabilities there are other places they can send it, like Singapore or Dubai.

"How much that will happen we simply don't know but there's already some signs."

Nearly all UK high street banks have subsidiaries in the Isle of Man and the Channel Islands and some are already reporting a drop in cash deposits.

Meanwhile, several of these financial institutions have warned of the impact on jobs because of the new directive.

BBC Radio 4's Money Box was broadcast on Saturday, 2 July, 2005 at 1204 BST.

The programme will be repeated on Sunday, 3 July, 2005, at 2102 BST.