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HM Revenue & Customs - Offshore Disclosure Facility (Tax Amnesty)
You may well have seen suggestions in the press over recent months that HM Revenue & Customs (HMRC) was about to announce an amnesty, or something similar, for people with undeclared offshore accounts. This speculation arose from HMRC having won a case which resulted in the major UK banks being required to supply HMRC with details of offshore accounts held by individuals living in the UK.
On 17th April HMRC announced their so-called "Offshore Disclosure Facility" (carefully avoiding the use of the word "amnesty") inviting taxpayers - be they individuals, Trustees or Limited Companies - who have not made a full declaration of their income, profits or gains in relation to offshore accounts or assets to come clean by making a full declaration of previously undeclared income and gains and with a guaranteed penalty, in addition to the tax and interest, of only 10% of the tax due.
Although this facility is specifically intended only for people with offshore income or assets, HMRC have also said that a similar parallel procedure for dealing with the reporting of previous under declarations which do not have any offshore connections will be available and with the same fixed penalty of only 10% of the tax due.
Ordinarily, the penalty applied to previously undeclared income and gains would be a matter for negotiation with HMRC and would typically be approximately 30% or more of the tax due, depending upon the circumstances of the case. HMRC have indicated that those with previously undisclosed income/gains who choose not to make use of this facility but for whom they possess information provided by the banks or others, will eventually face an investigation into their tax affairs - sometime after 30th April 2008 - and that such an investigation will be rather more rigorous than the procedure offered by this facility, with 30% probably being the minimum penalty applied.
This facility will be available for only a limited period of time and there is a set procedure and a tight timetable. A notice of intention to disclose must be made by 22nd June 2007 and a full disclosure made of all tax evasion (with payment of the total amount due in respect of tax + interest + the 10% penalty) by 26th November 2007. Full details of the facility can be found on the HMRC website at https://disclosures.hmrc.gov.uk
Although it is appreciated that most taxpayers are honest and pay all of their tax, for those with previously undisclosed income or gains (be it offshore or not) this is a one-off opportunity to come clean and to settle outstanding liabilities by way of a streamlined procedure and with some degree of certainty that provided a full and complete disclosure is made penalties will be ‘capped’ at only 10% of the tax due.
Barr Ellison has considerable experience of dealing with all types of Tax Investigations and if you would like to discuss this matter or any other aspect of your tax affairs please contact our Tax Manager Jeff Harrison for an informal discussion on a no cost, no obligations basis.
The information given in this article is of a general nature only and should not be considered as advice applicable to any particular situation for which specific request should be made to us.
